The Long Cold Winter

[ygmir]

*stands behind CSS and nods*

[can't sit still]

All the experts are raging on about inflation Vs deflation. Here's a comment from The Wall Street Journal;
"After studying more than a decade of deflation in Japan, economists have slowly realized they have no idea how it works....[..]" Well, that makes it a bit difficult to predict.
http://theautomaticearth.blogspot.com/2 ... tudio.html
"We have pointed out that credit expansion creates multiple and mutually-exclusive claims to the same pieces of underlying wealth-pie, thereby creating a fictitious wealth that will implode once people realize its existence and reality. Deflation is the chaotic elimination of excess claims to underlying real wealth "
"Some 95% (or more) of our money supply is credit"
"meaning that the overwhelming supply of virtual wealth disappears and we are left with only real wealth - we will have insufficient money to run our global economy. "

Mish has a good paper talking about how our demographics will continue to cause us to shrink.
http://globaleconomicanalysis.blogspot. ... c-doo.html
Keynesian economics demands continual growth. That's hard to do when the population is shrinking;
"The lack of population growth was likely a significant factor in the leveraging of the developed world’s financial systems and the ballooning of total government and private debt as a percentage of GDP from 150% to over 300% in the United States, for example. Lacking an accelerating population base, all developed countries promoted the financing of more and more consumption per capita in order to maintain existing GDP growth rates"
"More consumption per capita" finally hit the wall when we maxed out our credit.
GOV threw open the southern border to try to keep population from declining. The new arrivals sent their money to foreign countries instead of domestic banks. Things are just not working out as the banks plan.

[geekster]

People should remember that there is an example of another credit crises rather recently. We had a problem with over extended credit cards and other unsecured consumer debt in the 1980's. But what happened was the "home equity line of credit" that allowed people to roll all that debt into a "secured" line of credit backed by equity on their homes.

The default of primary mortgages is bad enough but the default on second mortgages and home equity lines of credit is what is really biting people in the ass. The piper has finally arrived for payment.

What the Democrats did was allow people to roll debt from one form into another form to simply kick the can down the road. The Home Equity Loan came into being as we know it during the Carter administration but was not widely used until the early 1980's. Basically it allowed people to use their house as an ATM. At the same time, using the Community Reinvestment Act, millions of new borrowers were tossed into the housing market. This increased demand for housing pushed housing values up creating a bubble with artificially inflated home values creating a lot of paper equity upon which people could draw for consumer goods purchases, college tuition, all sorts of crap.

Then HUD starting increasing the mandates on CRA loans by the GSEs causing the lenders to have to scrap deeper and deeper into the bottom of the barrel for borrowers. At the same time, there was Congressional pressure on the regulators to do whatever they could to help facilitate this lending just for the sake of it. It seemed like Congress considered the more low income people that could be shoved into mortgages they could barely afford, the better. And it was a great move there for a while when interest rates were falling and home values were inflating.

Then one day it was time for interest rates to go up. People with adjustable rate mortgages suddenly saw their payments rise. People who had only recently taken out mortgages and had no equity could not refinance into a conventional mortgage. So they began to default. At this point, people who were smart and had enough equity were converting like crazy. About 6 months after the interest rates first rose, the foreclosures began. This is when all hell broke loose. Foreclosures up to that point had been relatively uncommon so these new foreclosures could be processed fairly quickly. As they appeared on the market at auction, they began to depress median home prices.

Now that the inflation of housing prices began to reverse, it started putting the hurt on people who COULD afford their mortgage payments. First of all, many home equity loans were now under water. There would be no more borrowing from the house to pay for vacations, second homes, college tuition, etc. And there would be no more conversion of existing adjustable rate loans to fixed rate loans for homes that were now "under water".

As the wave of foreclosures burned through the sub-prime loans, the additional market inventory depressing housing prices began to impact the prime market. In some areas of the country NOBODY was going to be able to refinance an adjustable rate mortgage because homes in these locations were now hundreds of thousands of dollars under water. If you can't come up with the difference in cash, nobody is going to finance a $200,000 home for $500,000 and nobody is going to put $300,000 down on a $200,000 home. A good example of this sort of thing would be towns like Watsonville, California where homes that were selling for $650,000 in 2007 are now selling for $200,000. Anyone who bought a home in that area after about 2000 or so is in a world of hurt no matter how much money you make. Your house is now a major liability.

The people hurt most are probably the empty-nesters in their 50's who used the home equity to purchase a college education for their kids along with an RV and a bunch of home improvements. They were relying on that appreciation to pay for all that stuff and then continue until their retirement when they hoped to sell the home at a profit to finance their golden years. Now the mortgage is under water, they are only a decade or so from retirement and they can't start over. Their retirement dream is shattered. I am surprised that people aren't tar and feathering realtors with their "they aren't making any more land" crap that led people to believe that real estate prices would never go down.

We are almost through the worst of it, though. The worst comes between now and 2012. Once we get through about the middle of 2012, things should begin to pick up unless Congress finds a new way to kick the can down the road again. By that point most of the mortgages that are going to default will have defaulted. Pressure on bank reserves should ease and lending risk should begin to fall.

In the meantime there are still going to be a lot of shattered dreams for a lot of people and it is all the government's fault for using mortgage markets for their harebrained social engineering schemes.

[geekster]

Oh, look at this!

The Obama administration is seeking to make it easier for the FBI to compel companies to turn over records of an individual's Internet activity without a court order if agents deem the information relevant to a terrorism or intelligence investigation.

The administration wants to add just four words -- "electronic communication transactional records" -- to a list of items that the law says the FBI may demand without a judge's approval. Government lawyers say this category of information includes the addresses to which an Internet user sends e-mail; the times and dates e-mail was sent and received; and possibly a user's browser history. It does not include, the lawyers hasten to point out, the "content" of e-mail or other Internet communication.

But what officials portray as a technical clarification designed to remedy a legal ambiguity strikes industry lawyers and privacy advocates as an expansion of the power the government wields through so-called national security letters. These missives, which can be issued by an FBI field office on its own authority, require the recipient to provide the requested information and to keep the request secret. They are the mechanism the government would use to obtain the electronic records.

More here

http://www.washingtonpost.com/wp-dyn/co ... 41_pf.html

[ygmir]

*cue the music from when Darth Vader appears*

[geekster]

Well, I wonder how it can be abused. For example:

Hi, this is special agent Snert Ferggle from the Hooterville Field Office of the FBI and we need log information on the account activity of one Mr. Geekster.

Uhm, well, we are going to need a subpoena for that information.

No, not anymore, thanks to recent reform of the Electronic Communications Privacy Act with its new and improved privacy features, you are now required to give it to me just because I asked you to. Oh, and you are not allowed to tell ANYONE that I asked for it.

Hmm, I see. So how am I to get the information to you?

Just mail it to FBI - Hooterville Field Office; c/o Special Agent Snert Ferggle; 205 Sketchy Street; Hooterville, NC 54321 or you can email it to me at [email protected]

Hey, wait a minute, I am not emailing that to anything but an fbi.gov email address.

...

I suspect a lot more Internet operations are going to decide not to keep transaction logs anymore.

[Trishntek]

People should remember that there is an example of another credit crises rather recently. We had a problem with over extended credit cards and other unsecured consumer debt in the 1980's. But what happened was the "home equity line of credit" that allowed people to roll all that debt into a "secured" line of credit backed by equity on their homes.

The default of primary mortgages is bad enough but the default on second mortgages and home equity lines of credit is what is really biting people in the ass. The piper has finally arrived for payment.

What the Democrats did was allow people to roll debt from one form into another form to simply kick the can down the road. The Home Equity Loan came into being as we know it during the Carter administration but was not widely used until the early 1980's. Basically it allowed people to use their house as an ATM. At the same time, using the Community Reinvestment Act, millions of new borrowers were tossed into the housing market. This increased demand for housing pushed housing values up creating a bubble with artificially inflated home values creating a lot of paper equity upon which people could draw for consumer goods purchases, college tuition, all sorts of crap.

Then HUD starting increasing the mandates on CRA loans by the GSEs causing the lenders to have to scrap deeper and deeper into the bottom of the barrel for borrowers. At the same time, there was Congressional pressure on the regulators to do whatever they could to help facilitate this lending just for the sake of it. It seemed like Congress considered the more low income people that could be shoved into mortgages they could barely afford, the better. And it was a great move there for a while when interest rates were falling and home values were inflating.

Then one day it was time for interest rates to go up. People with adjustable rate mortgages suddenly saw their payments rise. People who had only recently taken out mortgages and had no equity could not refinance into a conventional mortgage. So they began to default. At this point, people who were smart and had enough equity were converting like crazy. About 6 months after the interest rates first rose, the foreclosures began. This is when all hell broke loose. Foreclosures up to that point had been relatively uncommon so these new foreclosures could be processed fairly quickly. As they appeared on the market at auction, they began to depress median home prices.

Now that the inflation of housing prices began to reverse, it started putting the hurt on people who COULD afford their mortgage payments. First of all, many home equity loans were now under water. There would be no more borrowing from the house to pay for vacations, second homes, college tuition, etc. And there would be no more conversion of existing adjustable rate loans to fixed rate loans for homes that were now "under water".

As the wave of foreclosures burned through the sub-prime loans, the additional market inventory depressing housing prices began to impact the prime market. In some areas of the country NOBODY was going to be able to refinance an adjustable rate mortgage because homes in these locations were now hundreds of thousands of dollars under water. If you can't come up with the difference in cash, nobody is going to finance a $200,000 home for $500,000 and nobody is going to put $300,000 down on a $200,000 home. A good example of this sort of thing would be towns like Watsonville, California where homes that were selling for $650,000 in 2007 are now selling for $200,000. Anyone who bought a home in that area after about 2000 or so is in a world of hurt no matter how much money you make. Your house is now a major liability.

The people hurt most are probably the empty-nesters in their 50's who used the home equity to purchase a college education for their kids along with an RV and a bunch of home improvements. They were relying on that appreciation to pay for all that stuff and then continue until their retirement when they hoped to sell the home at a profit to finance their golden years. Now the mortgage is under water, they are only a decade or so from retirement and they can't start over. Their retirement dream is shattered. I am surprised that people aren't tar and feathering realtors with their "they aren't making any more land" crap that led people to believe that real estate prices would never go down.

We are almost through the worst of it, though. The worst comes between now and 2012. Once we get through about the middle of 2012, things should begin to pick up unless Congress finds a new way to kick the can down the road again. By that point most of the mortgages that are going to default will have defaulted. Pressure on bank reserves should ease and lending risk should begin to fall.

In the meantime there are still going to be a lot of shattered dreams for a lot of people and it is all the government's fault for using mortgage markets for their harebrained social engineering schemes.

I'm bracing for the time when commercial property falls through the floor. How many Corporations have $Billions tied up in commercial property?

[geekster]

I heard a good one today. Apparently the federal government in 2011 is going to require sole proprietors to form either an S or a C corporation if they want to continue holding government contracts. No more sole proprietors. So the government will be able to say they have created thousands of new small business incorporations when they have really done nothing at all.

[can't sit still]

"We are almost through the worst of it, though. The worst comes between now and 2012. Once we get through about the middle of 2012, things should begin to pick up"
NOT going to happen. The jobs are still leaving. Our purchasing power is still falling. I read that 25 % of our jobs could still be off-shored. Even the big BSer Bernanke said that this is going to be crashed until 2016.
As CRE crashes, this will kick the crap out of the job and RE market. Just to make sure that we're thoroughly screwed, all these new taxes come online. Taxes have a 3X negative multiplier on GDP. With the GDP in the shitter, nobody will have a job to buy a house.
Houses will sell for the price that they sell for in other jobless third-world countries.
GOV seems like they want to give the middle-class a good Rogering. As the middle-class burn through equity and savings trying [involuntarily] to support the parasites, the whole country will get poorer. THAT will trickle down. Just like the guy who lived under a leaky outhouse.

the tax system explained

It's called "Our Tax System... Explained In Beer" and it
comes from David R. Kamerschen, who's a Ph.D. as well
as a Professor of Economics at the University of
Georgia

To quote David, "For those who understand this, no
explanation is needed. For those who don't, no
explanation is possible".

Suppose that every day, ten men go out for beer and the
bill for all ten comes to $100.
If they paid their bill the way we pay our taxes, it
would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in
the bar every day and seemed quite happy with the
arrangement, until one day, the owner threw them a
curve. "Since you are all such good customers," he
said, "I"m going to reduce the cost of your daily beer
by $20".
Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay
our taxes so the first four men were unaffected.
They would still drink for free.
But what about the other six men - the paying customers?
How could they divide the $20 windfall so that everyone
would get his "fair share"? They realized that $20
divided by six is $3.33.
But if they subtracted that from everybody's share, then
the fifth man and the sixth man would each end up being
paid to drink his beer.
So, the bar owner suggested that it would be fair to
reduce each man's bill by roughly the same amount, and
he proceeded to work out the amounts each should pay.
And so the fifth man, like the first four, now paid
nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 ( 22% savings) .
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before.
And the first four continued to drink for free.
But once outside the restaurant, the men began to
compare their savings. "I only got a dollar out of the
$20," declared the sixth man.
He pointed to the tenth man, "but he got $10!" "Yeah,
that's right", exclaimed the fifth man. "I only saved a
dollar, too. It"s unfair that he got ten times more
than I"! "That"s true!!" shouted the seventh man. "Why
should he get $10 back when I got only two"?
"The wealthy get all the breaks"! "Wait a minute," yelled
the first four men in unison. "We didn"t get anything at
all. The system exploits the poor"!
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks,
so the nine sat down and had beers without him.
But when it came time to pay the bill, they discovered
something.
They didn't have enough money between all of them for
even half of the bill!
And that, boys and girls, journalists, and college
professors, is how our tax system works.
The people who pay the highest taxes get the most
benefit from a tax reduction.
Tax them too much, attack them for being wealthy, and
they just may not show up anymore.
In fact, they might start drinking overseas where the
atmosphere is somewhat friendlier.

[sportsmobile]

prepping for the worst but hoping for the best. but my optimizm is running out

[can't sit still]

This is from Mish;
"There is a pretty direct correlation between job loss and foreclosure. Until the unemployment rates start to go down, and until we actually see net job creation, and importantly until consumer confidence comes back, the housing market has really slim chances of recovery. That coupled with the huge overhang of distressed property, really suggests the housing market is not going to turn around for the next few years."
http://globaleconomicanalysis.blogspot. ... blown.html
We need to create 150,000 new jobs a month just to stay even. It isn't going to happen.

[geekster]

I meant to say we are almost through the worst of the mortgage stuff in that by mid 2012 things will begin easing up there.

As for jobs, that is an entirely different can of worms as we have many different things pressuring that market.

One of the main issues has been the recent increase in federal minimum wage. This has thrown a lot of people out of work and prevented many more from being hired. Basically, a person must be worth some amount to the business hiring them that is greater than their salary else the business loses money by employing them. An employer must kick in, for example, 7.44% above and beyond the employee's salary for their half of the social security withholding and then there are costs associated with unemployment insurance, and other forms of insurance the employer must hold on their employees. So lets say an employee is "worth" $9 per hour to the employer as far as what they do. At a minimum wage of $6/hour, they are worth employing. At $8 per hour, they aren't. So an employer is faced with three choices; expand production with the existing employees; charge more for the existing production; let the employee go. Expanding production likely requires loans. Banks aren't giving loans. Charging more for a product during a recession could run you right out of business. You can't lower wages because that job already pays the minimum by federal law so your only recourse is to let the worker go.

It has been shown time and time again that wage and price controls actually have the opposite of the intended impact. If businesses are not able to lower wages during an economic downturn, they are left with no option but to let workers go. This is also true with higher paid union workers who have minimum pay and hours clauses in their contracts. These contracts prevent a business from adjusting expenses according to the market for their output. The result is greater unemployment and further economic downturn and the entire thing spirals down in a vortex of misery for everyone.

Government is making it harder and harder to employ people. Last week I saw new proposed regulations that would require businesses to report on the gender and ethnicity of all of their employees to the federal government. That is just more paperwork the small operator needs to fill out. The vast majority of people in this country are employed by small businesses. The corner gas station, food joint, barber shop, lamp store, pet store, etc. are likely small operators who have fewer than 20 employees. Every time government issues another such regulation, it increases the cost of a business having employees. I had a shop that was open five and a half days a week (Mon-Fri and a half day Sat). I spent half of Sunday every week doing paperwork. Today that same paperwork might eat up my entire Sunday. So I would get one half of one day off.

Increased minimum wages, intransigent labor unions, increased government regulations, increasing mandates on employers for various things like health care premiums, are all conspiring to cause businesses not to hire people. It is just too much of a pain in the ass to hire anyone.

Now the government wants to make it so you can't even be self employed, you must be employed by a corporation. This is because government makes more money if you are. If you are self-employed, you don't pay unemployment insurance on yourself. If you are the employee of a corporation, the corporation must pay it. Expenses like these are going to cause yet more marginal operations to simply evaporate. It is going to destroy a lot of the little businesses that make our communities go. It is going to force a situation where only the huge operators can have a shop. Independent business will disappear and everything will be chains increasing the disparity between us. Huge Megacorp will be the only operation left.

Actually, eliminating the individual business operator and making everyone employees of fewer larger corporations is how one political party wants to move the employment picture for easier central management of the economy. Having millions of people making millions of independent decisions is hard to centrally manage, it is like herding cats. This political entity can not allow the market to manage itself. The notion of not being "in control" of it just drives them crazy. So they play an interesting and quire Orwellian game. They make you promises that you will be 'taken care of' in exchange for putting more and more people to work for fewer and fewer people. They claim to be the party of the little person while giving a wink to the George Soros' and Warren Buffets' of the world as their policies make those people even richer.

One very clear example is the "death tax". Look at any family farm that has over $1 million worth of land. If the owner dies, the estate must pay $550,000 in federal death tax. The heirs won't have that kind of money in most cases and neither will the estate. As a result, the land will have to be sold to obtain the money to pay the tax. A corporate farm will buy the land. As it is a corporation, it never dies and never pays the tax. This government is doing everything it can to take individual operators out of the market and put greater amounts of resources into fewer hands.

The greatest impact might be a minority sports figure who amasses millions of dollars and dies unexpectedly at an early age without having their stuff already in some sort of trust. More than half their wealth will go to government. They will not be able to pass the majority of what they have earned on to their heirs. Besides actually giving the federal government a financial incentive to kill people, it ensures that there is no (or much less) "new money" to compete with the "old money" establishment.

They are very careful to make promises to various demographic groups which have deep emotional impact to them. They might offer illegal immigrants amnesty for example, but at the same time taking measures to ensure that they will spend their entire lives as someone else's employee and never be able to have a business of their own. So you make a promise on an issue that means a lot to someone to get them to vote for you, yet you take actions to ensure they can never really realize their dreams. It is sickening but so many people are so deep into the kool-aid that they either can't or won't see it.

[geekster]

See, here is one of the things that REALLY pisses me off about American politics. It isn't the difference of opinion, I can live with that. It is the out and out bald-faced lying. It is dishonesty like this that makes the people's opinion of Congress somewhere between lawyer and whale shit:

Steny Hoyer:

[quote]“We have no intention of allowing the Republican tax increase — that their policies would lead to — to go into effect for working Americans. Period,â€

[geekster]

This was Hoyer LAST month:

WASHINGTON (AP) - House Majority Leader Steny Hoyer said Tuesday that tax increases will eventually be necessary to address the nation's mounting debt, raising a difficult election-year issue as Democrats fight retain control of Congress.

In the shorter term, Hoyer raised the possibility that Congress will only temporarily extend middle-class tax cuts set to expire at the end of the year. He pointedly suggested that making them permanent would be too costly.

[can't sit still]

This paper talks about our impoverishment;
"How does one decrease the cost of labor in America? Well first, you have to bust the unions. Check. Then you have to create a pressing need for people to work - perhaps give them easy access to credit and then get them to go so deeply into debt that they will have to work until they die to pay them off. Check. It also helps if you push up the cost of living by manipulating commodity prices. Check. Then, take away people’s retirement savings. Check. Lower interest rates to make savings futile and interest income inadequate. Check. And finally, threaten to take away the 12% a year that people have been saving for retirement by labeling Social Security an "entitlement" program - as if it wasn’t money Americans worked their whole lives to save and gave to the government in good faith. Check"

In the original article, there is a link everywhere where it says "check"

"That is how the largest theft in the history of the world was carried out. 300M people worked and saved their whole lives to set aside $2.5Tn into a retirement system that, if it were paying a fair compounding rate of 5% interest over 40 years of labor (assuming an even $62Bn a year was contributed), would be worth $8.4Tn today - enough money to give 100M workers $84,000 each in cash! "

http://www.philstockworld.com/2010/07/1 ... e-know-it/

[geekster]

Social security was never designed to be a retirement program.

It was turned INTO one, but that wasn't the purpose of it. What you did was agreed to pay into it all your working life, and when you reached the age of average live expectancy (65 in 1935) then you got a small stipend to help offset the expense on your family for keeping you.

The whole idea of Social Security was to provide a tax that would be used to fund deficit spending. Social Security is required by law to turn all excess funds over to Congress in exchange for an IOU and Congress promptly blows the money on stuff.

We would need to set the "retirement" age to 80 now and cut social security payments in about half in order to return the program to what it was in 1935.

But I agree with you. Social Security is the greatest robbery of the US Taxpayer that has ever been perpetrated. Starting this year SSA gives no funds to Congress, only an IOU to be paid back. Where is Congress going to get the money? With no excess social security fundage to blow and social security demanding that their special bonds be redeemed, the Congress is going to be up a creek without a paddle.

[Sail Man]

*cue the music from when Darth Vader appears*

Well, it sure the hell isn't the theme music from Wheel of Fortune

All I can say is, to my friends here. Prep. I read something I saw on another forum that said one of the best hedges against inflation was buying now for use later.

The Alpha Strategy

You save money by buying the product now instead of later when the price goes up. Buy what you use. And either rotate or store it for the long term.

[ygmir]

yeah, good call Sailman........I do that already.....buy stuff in bulk.....stuff that keeps, anyway.

[geekster]

I don't believe prices are going to go up. I believe they are just as likely to go down. There is absolutely no inflationary pressure on the economy right now. Nobody is spending money. Nobody is lending money. Companies are accumulating cash because they can not get bridge loans and other letters of credit so they need to self-finance to keep business going.

There is absolutely NO inflationary pressure right now. The consumer price index for June was 217.965 which was down from May and less than April's 218.009 right now the economy is deflating, albeit slowly.

In a deflationary economy, the worst thing you can do is buy something in advance because it loses value every day. The problem is that the economy is just sort of sitting on the fence and could go either way. But until the housing market shakes out and those under water mortgages are gone, the economy is going to be stagnant.

[Trishntek]

But didn't I hear something about short-term gubmint bonds coming due? And when they have to either pay them with printed money or refinance that would trigger inflation?

[geekster]

If they just "print money" yeah, that would tend to be inflationary. If they find someone to lend us money, then we are kicking the can down the road, paying one credit card with another.

But if we see deflation, it sucks because:

1. Every tangible item you have loses value in real dollars, you would have been better off holding cash under your mattress

2. Debt becomes harder to pay because while prices are dropping, so is everyone's paycheck. So what was a reasonable payment several years ago becomes a lot of money.

Your house loses value, your car loses value, your investments lose value, the only thing that holds value is cash under the mattress because if you put it in a bank they are going to give you 0% interest and charge you fees for the privilege. Once people start putting cash under the mattress instead of in the bank, the deflationary spiral strengthens as banks have no money to lend.

The Democrats have fucked this economy royally. Oh, and I see Maxine Waters, one of my favorites is now up on corruption charges, too.

[can't sit still]

I posted a link somewhere that showed a graph of price changes during the Weimar meltdown. Yes, we will have price inflation. Yes, we will have price deflation. Prices of items that are usually bought with discretionary spending will tend to go down. Prices of items that are a necessity will tend to go up. This will depend on whether or not these items are subject to monopoly control or not.
Food went way up in Weimar. Rent went way down. Prices of items set by GOV can be counted on to go up. We already see business taxes and fees going UP. Same for traffic fines. GOV is very accommodating to utility companies that want to raise rates. In SoCal, they really push water conservation. Much of the water dept's expenses are fixed. So, the more that we conserve, the more that they raise rates to offset the losses incurred by conservation.
There is some agreement that price inflation lags behind currency inflation by something like 2.5 years.
To complicate the debate, there are claims of dis-inflation rather than deflation. Eric Jantzen has some good observations about expected and realized deflation;
http://www.itulip.com/forums/showthread ... post169911

Things like cement and steel will undoubtedly see price inflation. I see big raises in building materials already.
Much will depend on how much of the new currency inflation can be moved into the general economy.
I can't explain some of the factors. D.C. is spending like crazy. One would expect GOV to try to inflate away the debt. They're printing and spending like crazy. On the other hand, they're not really affecting the velocity of money. One would expect GOV to kick it up to the next level by showering money on the states to get the necessary inflation to inflate away the debt. GOV / Banks are deathly afraid of deflation. The states are crashing into austerity. Why aren't "they" blowing state bubbles to avoid deflation? Can't figure it out ??

[geekster]

If you look at various basic materials indexes you will find them down around 14% for the year. In inflationary times, basic materials and energy are up considerably.

At the current time, there are absolutely NO indications of inflation. Now that can and will likely change after about mid 2012 once the slug of 5-year ARMs from the peak RE bubble days makes its way out of the system. Then the banks will have huge reserves that they aren't going to need anymore. If the fed can't yank that money back from the banks fast enough, it is going to be lent out.

But that leads to the question: "who will borrow it"? If employment doesn't pick up, it isn't going to be the consumer. With the increases in capital gains and dividend taxes, business has little incentive to invest and expand. Venture capital will also be taxed at the regular capital gains rate which means research, development, and business startup is also discouraged by tax policy.

Everything I see so far points to government policies specifically designed to inhibit hiring, inhibit expansion, inhibit business creation, and inhibit development of new technologies.

This current regime has done pretty much everything they can do to ensure that there is no economic growth for a very long time.

The ONLY sector of the economy that is growing is government. While everyone else in the country is taking pay cuts, getting laid off, companies going broke, etc. you have government employees demanding pay raises, refusing to pay any part of their own health plans, refusing any moderation in their pension plans, etc. It is absolutely unsustainable and is a guaranteed path to economic ruin. It isn't rocket surgery. It is just plain arithmetic.

[geekster]

The oldest family farm in America .... gone.

In a sign of these dismal times, the oldest family farm in America is up for sale because its owners just cannot survive this down economy. After 378 years of contiguous family ownership and operation, the Tuttle family of Dover, New Hampshire is selling its 134-acre farm.

Founded in 1632 by John Tuttle fresh off the boat from the Old World, the Tuttle family farm has moved on with the times, improved and changed to continue operating. But, at long last, this economy is too much for them to bear.

[geekster]

http://online.wsj.com/article/SB1000142 ... inion_main

Raising taxes lowers revenue.

[geekster]

According to Congressman Pete Stark, the federal government can do whatever it wants to. The money quote is at about the 3 min mark.

[youtube][/youtube]

[geekster]

Wow, Jane Harman now owns her own news magazine. Her husband reportedly has purchased Newsweek ... for $1.

http://mediadecoder.blogs.nytimes.com/2 ... ompletion/

[can't sit still]

I'm trying to get together in my mind a picture of, for lack of a better name,, "supra human organizations."
Previously, we had royalty, royal dynasties, linear royal families. There were also banking families. Entropy and war tend to dissolve these concentrations of wealth and power. Countries and borders were in flux because of wars.
It's a new world. The nation-state was invented / formed about the 19th century http://en.wikipedia.org/wiki/Nation_state
The corporation is more or less a recent invention;
"During the period of colonial expansion in the seventeenth century, the true progenitors of the modern Corporation emerged as the "chartered company" Wiki.
Air travel, instant communication and computers have allowed corporations to grow without limit. Another entity that doesn't die is organized religion. Not to be left out, we can't forget organized crime.
All of these supra-human entities are trying to survive and thrive. The vast majority of their members are unimportant to the corporate body. The undead and undying body is all that is important.
These bodies don't pay inheritance tax. Since most have a "hive mind" they don't grow feeble and disintegrate. Since 99 % of their human assets are considered disposable, they promote a corporate attitude of eminently expendable people.

The competition is ruthless; religious purges, drug cartel wars. national wars, corporate wars. The all-consuming , undead body wars for energy, materials and adherents.
Man, as an individual is powerless against these supra-human organizations.
Like the "Borg" , these bodies want to assimilate and control all aspects of their physical environment.
A corporation isn't human and the board is unlikely to inject human considerations into corporate decisions. Organized crime is probably more humane.

We're being steamrollered by undead bodies whose tunnel vision is focused exclusively on profit.
As Geekster pointed out, increased taxes reduce GDP. All studies report that it is a 3X negative multiplier.
OK, so we're being crushed by an undead edifice with tunnel vision that can't see that it is destroying itself in the end. These bodies are absorbing as much wealth as possible. They have left no purchasing power for the individual. They are willing to suck up wealth until they destroy us and themselves.
Are corporations and nation states evolutionary dead ends? Are they just too parasitic to allow society to flourish? Will they bring us a society that is as sterile and dismal as the world of the Borg ?
Look at japan. 20 years of deflationary collapse and they can't possibly exit. The corporate zombies are being kept alive to the detriment of the general population. And what has this gotten them?????
"Children’s Day national holiday in Japan, showed that children comprised 13.3% of the population, declining for the 36th consecutive year and remaining at the lowest level worldwide"
http://www.japantoday.com/category/nati ... record-low
As the corporation flourishes or zombifies [depending] , individuals lose. How do we overcome the power of the supra-humans?

[geekster]

Are corporations and nation states evolutionary dead ends?

They get improved to death.

For example, this current economic downturn is due to a thing called the adjustable rate mortgage. If everyone had only fixed rate mortgages, when the fed raised interest rates to protect the dollar, people who were barely able to pay their mortgage wouldn't have seen their payment adjust upwards out of their reach. That was the first domino in the chain that started all of this.

The adjustable rate mortgage was an "improvement" that allowed people to get into homes they otherwise wouldn't be able to afford on the gamble that either the home would appreciate providing enough equity or their income would increase enough for them to qualify for a fixed rate loan.

That one little "improvement" was the domino that began an entire chain of events that resulted in all sorts of other stuff unraveling.

[geekster]

As things evolve they get "improved" on. Improvement after improvement are layered on top of each other. Soon you end up with something that looks like it was designed by Rube Goldberg and it is so complicated and there are so many cross-dependencies that you don't really know what impact a failure at one particular part of the whole system will have. It becomes more fragile as more and more things rely on some part of the whole system working properly.

Look at our current social infrastructure. All it will take is one year with weather like that in 1816 to cause total mayhem across most of the globe. There will be global riots as most of the US grain crop would fail. And it *will* happen. History is full of periods like that. People in our cities can not do one damned thing for themselves. Many can not cook a meal, hardly any can make a shirt or a pair of pants with their own two hands.

There was a time when you ate for the winter off what you put up in the summer. Nobody does that anymore. If there is any sort of disruption of the infrastructure, people will begin to starve. We have no grain surplus anymore. Its gonna be bad some day.