NationStates Jolt Archive

I'm just glad it's happening now and not in 2010. By that point, the economy will be in its recovery phase, which means the job market will be pretty damn good.

(2010 is when I graduate)

Hello recession. In all honesty the Fed should just raise rates and get it over with. There is no delaying the inevitable. These things happen every 7 years or so.

Tomorrow's trading is going to be interesting. I wonder if they will reach the price floors tomorrow.

I'm just glad it's happening now and not in 2010. By that point, the economy will be in its recovery phase, which means the job market will be pretty damn good.

(2010 is when I graduate)

Well it should be good by December 09 when I get out of school.

I wonder how many people will try to blame Bush or Congress despite the fact this is a cyclical recession and not a local US one. The worldwide markets are going to suffer just as much as ours will.

Well it should be good by December 09 when I get out of school.

I wonder how many people will try to blame Bush or Congress despite the fact this is a cyclical recession and not a local US one. The worldwide markets are going to suffer just as much as ours will.

I'm actually interested to see what degree of decoupling exists between the US economy and the rest of the world. If this US recession does not reduce global growth sufficiently enough to create a world recession, it will be a pretty startling indicator of the amount of diversification in the world economy. If it does cause a recession, it will be a sign that the US still holds a crucial role in determining the overall trend of world growth.

It remains to be seen, however. We don't even know for sure if we're in a recession yet, let alone the extent to which the economy will slow. I do believe this one will be milder than 2001 regardless of what happens, however; the losses from the stock market crash were far more widespread and deep than the fallout from the housing bubble.

I'm actually interested to see what degree of decoupling exists between the US economy and the rest of the world. If this US recession does not reduce global growth sufficiently enough to create a world recession, it will be a pretty startling indicator of the amount of diversification in the world economy. If it does cause a recession, it will be a sign that the US still holds a crucial role in determining the overall trend of world growth.

It remains to be seen, however. We don't even know for sure if we're in a recession yet, let alone the extent to which the economy will slow. I do believe this one will be milder than 2001 regardless of what happens, however; the losses from the stock market crash were far more widespread and deep than the fallout from the housing bubble.

The worldwide markets will certainly be affected. It was actually the decline of global exchanges today which has pushed Dow Futures down so much for tomorrow's trading.

The worldwide markets will certainly be affected. It was actually the decline of global exchanges today which has pushed Dow Futures down so much for tomorrow's trading.

Of course, it's also true that global declines reflect fears of problems in the US moreso than problems in their own countries. Personally, I think this "stimulus package" is nothing more than a waste of money meant to buy votes going in to 2008 and is a shameful, ineffective way of interfering in a necessary economic readjustment.

Of course, it's also true that global declines reflect fears of problems in the US moreso than problems in their own countries. Personally, I think this "stimulus package" is nothing more than a waste of money meant to buy votes going in to 2008 and is a shameful, ineffective way of interfering in a necessary economic readjustment.

I will agree to that.

Did you see India's markets though? Down 9.8% in a single day!!!:eek:

One-day falls don't seem very significant, sometimes the market bounces back even further than it fell.

The week's trend, on the other hand (about 5% down?) is significant.

I'm sorry for the people who will lose their mortgages or their jobs, and for the people who have to keep a crap job because the economy isn't giving new opportunities. But a completely cyclical recession seems overdue to me, it might even be a healthy thing.

If that sounds a bit weird, consider the risk posed by another ten years of uninterrupted growth. All assets would be essentially overvalued, share traders would have quite forgotten how to cope with downturns ... so a sudden external blow like an oil-price spike or a major war disrupting trade could precipitate a full-blown depression, companies folding overnight, huge stress on welfare budgets, the whole disaster.

This just looks like a cyclical recession to me. The sort we used to believe was inevitable.

I lost A$7000 yesterday. Woo. :rolleyes:

Sometimes I hate the way traders get so emotional. It's worse than a bunch of girls on Oprah.

I'm sorry, but the fundamental value of the largest German companies did not suddenly fall by almost 8%, guys. Get a freakin' grip.

Look on the bright side. It might be a buyers market after a few weeks/months/years.

*is thankful for Gold*

I'm sorry, but the fundamental value of the largest German companies did not suddenly fall by almost 8%, guys. Get a freakin' grip.

The irrationality of the stock market was one of the biggest reasons why I decided not to major in finance and am pursuing accounting instead.

This is a great time for those of us who play the exchange game. My stash of Norsk Kroner has paid off handsomely. Woot.

Actually, I shouldn't really be celebrating, since I'm due to graduate this year. But I didn't really want to go straight into work anyway. I'll just go write a book, do some quick web-design contracts and a bit of volunteer work until things pick up a bit.

Good.

I had a feeling that the stock market was going to tank in 2008 (the stock market graph of 2007, at least in New Zealand, bore a striking resemblance to the graph of 1997), but I did not expect it to happen so quickly. Neither Australia, nor New Zealand, has had a positive day this year and I have not seen a collapse like this since 1998.

My personal opinion is, expect worse to come. All you need is a major financial institution to collapse in America, then panic would get worse - in New Zealand, we have already seen the effects of panic; fifteen of our finance companies have collapsed, and about half were caused by investors wanting to pull out after the collapse of the first half dozen.

At least we can be grateful that the price of oil is coming back down - I was dredding my train becoming more crowded and being forced to stand.

Good.

It's good to know that someone is reveling in America's Downfall.
Har. Har.

Alright, I'm leaving.. *dodges rotting vegetables*

I lost A$7000 yesterday. Woo. :rolleyes:

Sometimes I hate the way traders get so emotional. It's worse than a bunch of girls on Oprah.

I'm sorry, but the fundamental value of the largest German companies did not suddenly fall by almost 8%, guys. Get a freakin' grip.

I know all of that. I hate short term traders because they act like a bunch of idiots through every such cycle. If you hold on to stocks through the recession, you will find that over the long run you make more money. If anything, a smart investor will buy stuff up during the recession.

I had a feeling that the stock market was going to tank in 2008 (the stock market graph of 2007, at least in New Zealand, bore a striking resemblance to the graph of 1997), but I did not expect it to happen so quickly. Neither Australia, nor New Zealand, has had a positive day this year and I have not seen a collapse like this since 1998.

My personal opinion is, expect worse to come. All you need is a major financial institution to collapse in America, then panic would get worse - in New Zealand, we have already seen the effects of panic; fifteen of our finance companies have collapsed, and about half were caused by investors wanting to pull out after the collapse of the first half dozen.

At least we can be grateful that the price of oil is coming back down - I was dredding my train becoming more crowded and being forced to stand.
Things won't get too bad as there is not a single financial institution in the US that is in danger of collapse. Should one get close to that point, then the Fed will step in and insure that those who hold accounts with that company are protected.

I'm just glad it's happening now and not in 2010. By that point, the economy will be in its recovery phase, which means the job market will be pretty damn good.

(2010 is when I graduate)

That's the most asinine thing I've ever heard. You just can't brush aside the intricacies of the current economic situation and say "Thank God the economy will reliably and predictably be in an upcycle by the time I graduate."

Each recession has its own unique problems. In our case, a part of the problem is:

- the poor understanding by the financial sector of the full extent of the nature of the risk spread about by the current subprime mortgages crisis.

- the current cloudy picture of the full extent to which risk has been distributed in other sectors of capital financing (exuberant financing of Asian heavy industry, for example).

- the role that currency fluctuations will play in our ability to secure continued financing by way of the foreign bail-out of U.S. government debt.

- the potential economic impact posed by attempts to create some form of universal health care in the face of already soaring health care and current plus projected future entitlement costs.

- political stability issues in the stretch of Asia between Israel and Thailand that also happens to be a strategic choke-point in the production and distribution of natural gas and oil (Saudi oil, Central Asian pipelines effected by Pakistan and Afghanistan, Burmese offshore oil fields, etc.).

- whether or not Moody's shafts our Triple-A credit rating.

- whether France, Germany and Japan can fully pull themselves out of their economic funks and bolster our flagging export sector.

Get real.

*snip*

Get real.

Hello Pawpet.

So who is your master?

That's the most asinine thing I've ever heard. You just can't brush aside the intricacies of the current economic situation and say "Thank God the economy will reliably and predictably be in an upcycle by the time I graduate.

There hasn't been a recession in decades that took longer than a year to reach its trough, even with economic conditions far worse than those at present. The housing bubble's burst has generated nowhere near the same amount of wealth destruction as the collapse of the stock market in 2000 and 2001, so it is highly unlikely given the considerable expansion of the BRIC nations and the renewed economic strength of Europe that this will be a more severe recession.

I'm not worried. There's no reason to be, and in fact there is zero guarantee that the world economy will even fall in to a recession; I can always take a job outside the US if need be. The world needs accountants, and I'm more than happy to take a good job whether it's here in the US or anywhere else in the world.

Fact is, companies always need accountants regardless of the health of the economy. It is one of the most, if not the most, secure and fastest growing job categories in the business environment, Even bankrupt firms need them to determine the proper liquidation of assets.

That's the most asinine thing I've ever heard. *snip plausible analysis*

"Asinine"? Noobs aren't supposed to say that!

Jeepers, if this place gets any more pretentious, we'll have noobs calling each other for "cognitive dissonance."

Noob, take up your hallowed smilie and use it as noobs do:


:sniper:

Great, the ASX coped a hammering because of this ... doesn't help the value of my already depressed share portfolio.

Mmm, sorry about that. I should know that elaborate jokes aren't funny. Oh well.

How many of you think the current downturn is mainly due to the subprime mortgage crisis which originated in the US ...?

Peak Oil is pretty clearly happening (oil price steadily increasing in currency terms, not due to any specific crisis) ... the US has run a huge deficit to fund the Iraq war, and probably stands to lose this corrupt "investment" in cheap oil, with or without democracy in Iraq ... and it's been a long, long bull market.

All of those are growing pressures, not crises. So, is the subprime mortgage collapse the main cause of the current falls on the market?

EDIT: Er, Jerusalem: The sig didn't offend me, it's just a rule, huh? Nine lines of oversize text would offend just about anyone!

EDIT: Er, Jerusalem: your sig exceeds the mandated eight (9?) lines. It doesn't offend me a bit, just, er ... you could put it together onto fewer lines. I keep hitting the sig-editor's character limit, on four lines!

Siggy back to 9 lines ... and I'm still just on the known character limit.

I have a feeling central banks will step in today if the US markets appear to be slated for a massive decline. It's highly unlikely they will want to allow a huge amount of wealth destruction on the verge of a recession; falling 5% over the course of a month is manageable, but it happening in one day just screams panic selling and that is generally financially unacceptable. It remains to be seen, however, whether they feel intervention will be beneficial or counterproductive; intervening too soon or too much will cause more pain down the line, and not intervening soon enough or too little will also cause more pain down the line.

The Dow and S&P are off about 15% and the Nasdaq 18%, which means, based upon previous bear markets that we're about 5% away from a bottom in the Dow and, unfortunately, probably around 12% away from reaching a bottom in the Nasdaq. I believe we may see capitulation sometime soon; the atmosphere is getting very gloomy, which tends to be a good sign for an upturn. However, if next week's economic data comes in very poor and the Federal Reserve doesn't respond in a way sufficiently aggressive enough for investors, we could still have a while to go.

I'm personally saying that we will see short-term market capitulation sometime between now and the end of the first quarter, perhaps with a small bull market in the spring and summer with a return to the volatile doldrums as the election approaches. It won't be until after the election that we have a clear idea of what to expect in 2009; given that the commodities secular bull market should be approaching its top in the 2010-2011 period, it's plausible that a rotation in to equities might be on the horizon following this year's recession or economic slowdown (again, depending on how things develop).

Either way, unless you're particularly astute or have a lot of shorts, 2008 is going to be a loss.

How many of you think the current downturn is mainly due to the subprime mortgage crisis which originated in the US ...?
It's due to the financial crisis pressing on people's minds. They stop spending (and that's only strengthened if their house prices fall) and that brings on the recession. If investment is also going into a slump because of the tight credit, that just adds to it.

And if all that wasn't enough, rising fuel prices and a weaker dollar mean that people might shift their spending away from some items and into others, which brings problems for industries that make discretionary consumption goods.

Peak Oil is pretty clearly happening (oil price steadily increasing in currency terms, not due to any specific crisis)
No, it isn't. The price rises are due to extra demand from China et al which big oil companies (of which many have neglected to spend enough on expanding capacity) can't just satisfy without breaking a sweat. Then there are various crises and the common price denomination being in US Dollars, which have been falling in value. None of these things have anything to do with the reserves in the ground.

All of those are growing pressures, not crises. So, is the subprime mortgage collapse the main cause of the current falls on the market?
The world economy is in a fundamentally good shape. The only real structural imbalances are in the US' big current account deficit, which the drop in the US Dollar will help bring back down over time, and perhaps the fact that housing bubbles have appeared all over the place. Housing affordability is becoming a bigger and bigger issue in many countries, and the prices can't keep rising faster than incomes. When they stop, that will have effects on household wealth - on the plus side, you'd think financial institutions will learn from this not to bet too much cash the wrong way when it eventually happens in their home countries.

And US Government debt isn't nearly as big a problem as people like to make it. It's annoying for US taxpayers because they'll have to pay the interest, and annoying for future US governments because their ability to spend as they want will be diminished - but as a percentage of GDP it's not that huge, and there are bigger movers and shakers in the world these days. Germany is making progress towards fixing a bigger deficit than the US one at the moment. It's not that hard if the government makes it a priority.

If you want to paint doom scenarios, I suggest you look at some of the big sovereign wealth funds. If one of them takes a serious hit, that could give some fireworks. :p

I'm just glad it's happening now and not in 2010. By that point, the economy will be in its recovery phase, which means the job market will be pretty damn good.

(2010 is when I graduate)
Ditto. Now, all I need is the housing market to collapse before I need to look for next year's accommodation.

No, it isn't. The price rises are due to extra demand from China et al which big oil companies (of which many have neglected to spend enough on expanding capacity) can't just satisfy without breaking a sweat. Then there are various crises and the common price denomination being in US Dollars, which have been falling in value. None of these things have anything to do with the reserves in the ground.

Conventional oil is probably pretty close to peak, or rather its plateau, but world oil production (which includes unconventional sources and NGLs) is still rising and at its highest levels in history. Of course, a peak in conventional oil is becoming pretty much meaningless due to the fact that many refineries have already been upgraded to handle unconventional sources and increased efficiency and exploration have significantly boosted the availability and economics of natural gas for NGL production. I've been reading articles about colossal new discoveries of natural gas as well as improvement in biogas production, making it a viable source of the fuel.

True peak oil in and of itself is probably several years away at least, and given how alternative energy is blowing past any past estimates of its growth potential and applications, I'm not convinced it's even going to be a serious macroeconomic issue. It'll cause some slowing in global growth and some economic troubles, but we're not going to get Mad Max or another depression.

I have a feeling central banks will step in today if the US markets appear to be slated for a massive decline. It's highly unlikely they will want to allow a huge amount of wealth destruction on the verge of a recession; falling 5% over the course of a month is manageable, but it happening in one day just screams panic selling and that is generally financially unacceptable. It remains to be seen, however, whether they feel intervention will be beneficial or counterproductive; intervening too soon or too much will cause more pain down the line, and not intervening soon enough or too little will also cause more pain down the line.

The Dow and S&P are off about 15% and the Nasdaq 18%, which means, based upon previous bear markets that we're about 5% away from a bottom in the Dow and, unfortunately, probably around 12% away from reaching a bottom in the Nasdaq. I believe we may see capitulation sometime soon; the atmosphere is getting very gloomy, which tends to be a good sign for an upturn. However, if next week's economic data comes in very poor and the Federal Reserve doesn't respond in a way sufficiently aggressive enough for investors, we could still have a while to go.

Yeah, it's crunch time for Federal Reserve Banks. If they try and fail, and there's a deep recession, they've pretty much signed their own death warrants. If they do nothing but leave it to the market, they damage their credibility (only a little if the market recovers soon, quite a lot if there is a major worldwide recession.)
There are two options: drastic action, or no action. I bet the governors are on the phone to other reserve banks around the world, trying for a concerted effort ...

short-term market capitulation ... the volatile doldrums ... the commodities secular bull market ... a rotation in to equities on the horizon

Whatever they're doing for our prosperity, economists will go down in history as flagrant rapists of the English language. ;)

Either way, unless you're particularly astute or have a lot of shorts, 2008 is going to be a loss.

As a matter of fact, I AM particularly hirsute, and own many pairs of shorts. Mostly, they were trousers but suffered depreciation due to drive-cog forces while riding my bicycle, and canine correction of their cuff assets.

The world economy is in a fundamentally good shape. The only real structural imbalances are in the US' big current account deficit, which the drop in the US Dollar will help bring back down over time, and perhaps the fact that housing bubbles have appeared all over the place. Housing affordability is becoming a bigger and bigger issue in many countries, and the prices can't keep rising faster than incomes. When they stop, that will have effects on household wealth - on the plus side, you'd think financial institutions will learn from this not to bet too much cash the wrong way when it eventually happens in their home countries.
It's become a huge issue in the UK and has been for a while. It hits the right buttons (being household income and immigration) for the press, who are also today screaming for a rate cut. My dad had to get the value of our house (for insurance purposes) while I was on my Christmas break, and the value has nearly quadroupled in, what, ten years. Admittedly, this is in a place with the third highest house price inflation in the country (35%, I think) but I really don't know how long it can last, despite the annual predictions of a crash, they never seem to come to fruitition, seeming as how we Brits love debt.

But economics isn't my strong suit.

I know all of that. I hate short term traders because they act like a bunch of idiots through every such cycle. If you hold on to stocks through the recession, you will find that over the long run you make more money. If anything, a smart investor will buy stuff up during the recession.Buy stuff? How are investors going to do that? One of the key components of a recession is lack of access to money - both consumers and lenders do not want to give you money as they think the risks are high.

From what I've gathered about the stock market it is an important part of the current capitalist system as it allows for the smooth transfer of capital. Now on the backs of the long-term investors you need to have short-term investors how are buying and selling very quickly - thus allowing the markets access to large amounts of money.

The problem is during a downturn no one has easy access to money and therefore companies and individuals need access to money to continue day-to-day operations. However, the problem is everyone needs money, but very few people are willing to spend what they've got or loan more out due to fears about the current state of the market. This means it becomes harder to turn stock assets into money and so they become worth less and less as supply of the stock increases and demand drops. This causes the short-term traders to abandon trade in that stock thus further making it hard to sell those stocks. As far as I can see this process continues until companies start going under from lack of access to money. This in turn reduces the supply of stock in the market. Eventually there comes are point where stock is now undervalued due to everyone needing money. Some people spot this and start buying up stock again and so the upturn begins and will go on until someone finds a reason to hold onto their money rather than buy stock.

I don't see why Neu Leonstein feels able to complain about the price of his stock dropping. As far as I remember he is quite a staunch supporter of capitalism and therefore the supply-and-demand-theory-of-value instead of the labour theory of value. In the capitalist system his stock is only worth as much as someone is willing to pay for it. So it people don't want a certain stock or need money more than they need stock then the stock will fall in value as a result. The price of the stock has little to do with what it actually represents (this is just used as a guide price). The stock will be valued more if people believe it will offer better returns in the future (one reason why recessions can begin because people believe the opposite - that returns will be less).

(sorry if this is wee bit incoherrent - I have to dash off to a lecture and don't have time to refine the post)

How many of you think the current downturn is mainly due to the subprime mortgage crisis which originated in the US ...?

It's due to the financial crisis pressing on people's minds. They stop spending (and that's only strengthened if their house prices fall) and that brings on the recession. If investment is also going into a slump because of the tight credit, that just adds to it.

And if all that wasn't enough, rising fuel prices and a weaker dollar mean that people might shift their spending away from some items and into others, which brings problems for industries that make discretionary consumption goods.




Peak Oil is pretty clearly happening No, it isn't.

But the paragraph before, you mentioned rising oil prices? The 'market' was't smart enough to see rising demand from China?

I say the rising price is systematic. It's due to scarcity: there has never been a commodity so carefully assessed in its extent than oil, and the price is rising in well-assessed expectation of its scarcity.

The price rises are due to extra demand from China et al which big oil companies (of which many have neglected to spend enough on expanding capacity)

The biggest commodity industry in the world can't read the market? Jeez ...

No, they're buying into scarcity by creating their own monopoly scarcity, refining capacity. They can beat off competitors for oil refinery, and potential competitors know it, the competitors look at the established relationships of oil purchase and petrol retail, and just give up before they even try.

Who tries? Nationalists like Chauvez. Unionists like Solo. They get beaten down by the duopolists of this massive, critical commodity industry: oil.

It's hugely unfair. The oil exists in one place, the market mostly in another. Any company which knows where the oil is, has the skills to extract it, and knows where the market is, can extend that market on its own terms (eg, SUV's), and owns the corner blocks where they can sell the petrol ... can dictate the terms of trade.

And don't come with the "it's not a monopoly because the oil companies have to compete with each other." You are old enough to have seen Easter prices on petrol.

None of these things have anything to do with the reserves in the ground.

The reserves in the ground are generally assessed by oil companies. They lie, the only authorities which will call them on their lies are other oil companies, so they collude with other oil companies to lie. Peak oil is happening, oil is a diminishing resource like domestic labor, the price goes up beyond the CPI from now on.


How many of you think the current downturn is mainly due to the subprime mortgage crisis which originated in the US ...?

Peak Oil is pretty clearly happening (oil price steadily increasing in currency terms, not due to any specific crisis) ... the US has run a huge deficit to fund the Iraq war, and probably stands to lose this corrupt "investment" in cheap oil, with or without democracy in Iraq ... and it's been a long, long bull market.

All of those are growing pressures, not crises. So, is the subprime mortgage collapse the main cause of the current falls on the market?The world economy is in a fundamentally good shape. The only real structural imbalances are in the US' big current account deficit, which the drop in the US Dollar will help bring back down over time, and perhaps the fact that housing bubbles have appeared all over the place. Housing affordability is becoming a bigger and bigger issue in many countries, and the prices can't keep rising faster than incomes.

We agree on that. The dream of "owning your own house" (which some have called the Australian Dream) really does end when you have to leave your house to your kids, but with an undischarged mortgage attached. There is a natural limit to this.

Where we probably disagree is on what happens after that point, where the average (or even sixth percentile) lifelong earnings does not suffice to buy a house in the city near the place of work.

I specify that this clear majority of adults elects a government which intervenes in the housing market and ensures that a lifetime of earnest work (not brilliant, inspired, Rand-ian work) suffices to buy a house within a hours travel from the place of work, with space enough to have a barbeque in the back yard, a room for each of the kids, and a place to park the car.

This might happen by offering loans (from the treasury) at the CPI. It might happen by the government buying property and erecting houses, then offering them for mortgage under non-profit (for govt) terms. It might happen by building huge quantities of "public" housing (a charity list where the applicants actually get a house sooner rather than later.)

Government can do that. What has your "free market" got?

When they stop, that will have effects on household wealth - on the plus side, you'd think financial institutions will learn from this not to bet too much cash the wrong way when it eventually happens in their home countries.

Hey, what the fuck kind of economist are you? Financial corporations don't give a fuck about their "home countries," except by some nationalist sentiment of the major shareholders or the board. "Nationalism" is just a market strategy, the laws the country they are founded in are only as good as that country's government's willingness to enforce them, which is minimal since as a corporation they can easily move their assets elsewhere, rendering prosecution a huge waste of money.

For an example, if the US government really tried to break Microsoft's illegal monopoly of the Operating System market (and yes, it's a monopoly -- the only serious opposition to their hegemony of the usage of OS's is an ideologically-based, essentially charitable "free beer" movement) ... Microsoft would move to $Russia. As it is, MS can hold off the governments of the US and the EU for years to come.

And US Government debt isn't nearly as big a problem as people like to make it.

I wasn't making it a "doomsday scenario, we'll all be ruined" thing. I was just saying that it's getting steadily worse, and it's a factor in bringing about an US recession.

It's annoying for US taxpayers because they'll have to pay the interest, and annoying for future US governments because their ability to spend as they want will be diminished - but as a percentage of GDP it's not that huge, and there are bigger movers and shakers in the world these days. Germany is making progress towards fixing a bigger deficit than the US one at the moment. It's not that hard if the government makes it a priority.

If you want to paint doom scenarios, I suggest you look at some of the big sovereign wealth funds. If one of them takes a serious hit, that could give some fireworks. :p

Little fish eat smaller fish. The no-doc and low-doc loans were very small fish being eaten by small fish of the banking industry: the very small fish paid their premiums, they got nothing. The small fish went broke, but their employees all got paid and their CEO's were set up for life.

If it moves up the chain, the richest (and best-informed) get very rich, and everyone else loses in some degree. The retirees who had their wages docked to "pay for their retirement" get screwed, the speculators get average returns (on average, some get screwed, some have a windfall), but the real smart money, the big money which is best informed, well, they bought gold or Kroner or something, weeks before this hit the news.

There could well be a crisis, but it has hit the markets before it hit the news. Suppose for instance, that you had inside knowledge of a fundamentalist coup in Pakistan. You could go to the Pakistan government, be imprisoned and questioned ... you might get some reward if your information prevented the coup, or you might just disappear. You could go to the CIA, you might get financial rewards and a new identity in some other country, but the fact that the US acts on your information cannot be concealed. You'd be in danger from the conspirators you blew the whistle on for the rest of your life. Or you could leak what you have to one faceless representative of a stock-trading corporation. A company which does 'inside information' for a living.

That last one is the money shot. If you have information, and that's your best shot (and information is risky trading goods, you need a lot in reserve to prove it's yours) you don't go to your national government, you don't go to the CIA ... you hawk it around those who can really make something from it, the big money of the stock markets. The real power in this, our capitalist world.

On a personal note, I'm glad you lost $7K today. I hope it shakes your faith somewhat in the virtue and fairness of the stock market. I'm sure you did nothing dumb or unethical in your investments, but you got shafted anyway.

so it was a bad idea to quit my job?

is it just me or does the world seem to be out to get me all of a sudden :p

As it stands, I'm sitting in a spot where my pre-existing investments are quite secure (federal and municipal bonds, plus that antique life insurance policy my parents bought me when I was born), and am evaluating potential purchasing options in the stock market. Specifically I'm looking for firms whose value fell, not because of any internal problems, but because of the generally negative perception that the markets are facing at the moment. Pretty much, I'm looking for those investments that are the victims of irrationality.

so it was a bad idea to quit my job?

is it just me or does the world seem to be out to get me all of a sudden :p

No just because you're paranoid doesn't mean they're not out to get you.:)
I hope this doesn't fall through the floor like the Wall Street Crash, eep i worry about future sometimes.

I have only a rudimentary knowledge of investing. This past week I spent 90%+ of my savings by purchasing shares of a S&P 500 index fund for my retirement account.

I am pretty pleased with myself as I think that I really bought into the market while it was on sale. My only regret is that I did not wait longer (i.e. until today to invest the whole amount but instead bought in stages as the market went down. However, this is the sort of regret that only comes with hindsight. I did not know last week that things would continue to drop. I bought most of the shares when the market was down 9% or so.

Thanks to Federal Reserve cutting rates by .75% early this morning the damage to the Dow was restricted to a loss of 128.11.

Thanks to Federal Reserve cutting rates by .75% early this morning the damage to the Dow was restricted to a loss of 128.11.

Who called it, huh? :D

Of course, it's also true that global declines reflect fears of problems in the US moreso than problems in their own countries. Personally, I think this "stimulus package" is nothing more than a waste of money meant to buy votes going in to 2008 and is a shameful, ineffective way of interfering in a necessary economic readjustment.
It's nice to see that the candidates can agree that the economy needs stimulating. It's even better to see that the Fed agrees. That was part of the problem with the 2001 recession; Greenspan acted too late and too little.

Now, if the government really wanted to stimulate the economy, I can think of a quick way to release about $500 billion of stimulus... Enact the FairTax and eliminate compliance costs with the current POS called the tax code.

Of course, it's also true that global declines reflect fears of problems in the US moreso than problems in their own countries. Personally, I think this "stimulus package" is nothing more than a waste of money meant to buy votes going in to 2008 and is a shameful, ineffective way of interfering in a necessary economic readjustment.

Agreed. "All a check for a few hundred dollars does is reminds you of how FUCKED you are." -- Lewis Black

Things won't get too bad as there is not a single financial institution in the US that is in danger of collapse. Should one get close to that point, then the Fed will step in and insure that those who hold accounts with that company are protected.

Yes, because when citizens do it, we get new bankruptcy laws that make mistakes and crushing debt harder to recover from. When corporations and banks fuck up, the government trips over itself looking to bail them out. Welfare is bad...unless it's for business.

It's due to the financial crisis pressing on people's minds. They stop spending (and that's only strengthened if their house prices fall) and that brings on the recession. If investment is also going into a slump because of the tight credit, that just adds to it.

*snip the remaining analysis*


So must everyone keep spending? Even those in debt? What kind of economic policy IS that? Can anything continue to grow in a finite system? Even if that's possible, is it wise?

It's nice to see that the candidates can agree that the economy needs stimulating. It's even better to see that the Fed agrees. That was part of the problem with the 2001 recession; Greenspan acted too late and too little.

Now, if the government really wanted to stimulate the economy, I can think of a quick way to release about $500 billion of stimulus... Enact the FairTaxand eliminate compliance costs with the current POS called the tax code.

A 23% sales tax that's actually 30%? You're off your nut. I'll pass.

Who called it, huh? :D

I was expecting a half point cut, but the .75% seems to have alleviated much of the day's issues.

I was expecting a half point cut, but the .75% seems to have alleviated much of the day's issues.

That was a shock. However, if this successfully stimulates the economy enough to prevent recession, it was well worth it. It remains to be seen what the effects on growth and inflation will be, although a cut this deep should begin to produce changes in fairly short order.

I don't see why Neu Leonstein feels able to complain about the price of his stock dropping. As far as I remember he is quite a staunch supporter of capitalism and therefore the supply-and-demand-theory-of-value instead of the labour theory of value. In the capitalist system his stock is only worth as much as someone is willing to pay for it. So it people don't want a certain stock or need money more than they need stock then the stock will fall in value as a result. The price of the stock has little to do with what it actually represents (this is just used as a guide price). The stock will be valued more if people believe it will offer better returns in the future (one reason why recessions can begin because people believe the opposite - that returns will be less).
Shares are an interesting case because they really have no value other than the expected future cash flows. So comparing the inherent value with the market value becomes a lot easier than trying to do it with an LTV. By the same token, the people who buy and sell them have fairly unambiguous goals - maximising returns while minimising risks. So that allows economists to actually analyse how much shares should by right be worth, and then see the expectations about the future cash flows inherent in the market prices.

So a sudden fall by 7.1% for a bunch of companies who are at best indirectly affected by the trouble in the US serves to highlight a certain irrationality in the traders of the German stock exchange. Even if there is a bad recession in the US, the German domestic market isn't heavily affected by that. Indeed, the export sector is also no longer dependent on US demand because of sales to the developing world. So there was a sudden and unmotivated drop in the expectations of the traders.

Over time that will sort itself out of course, but it really just points out that they're being a bunch of morons, which is what I complained about.

Of course you have a point about the short term dynamics of it being influenced by a need for liquidity, but even that seems more of a herd-type behaviour than grounded in good reasoning. There may be some who feel they can buy good shares cheaply at the end of a crash and try to free up money to do so, but if everyone does that, they just end up devaluing their portfolios as they go along.

Either way, studying liquidity and its effects are going to be the big new innovations in finance theory over the next few years. The subprime crisis was essentially caused by the sudden freeze in the market and the liquidity problems that came from that, and it's probably the biggest area that isn't covered adequately in the theory. Maybe I turn out wrong and everyone acted perfectly rationally by selling off like this. But I'd be willing to bet that whenever you hear them talk about "panic", they're being big sissies too.

The biggest commodity industry in the world can't read the market? Jeez ...
Pretty much, yes. Or they were otherwise constrained by issues that weighed heavier on their minds (investor returns, for example).

Who tries? Nationalists like Chauvez. Unionists like Solo. They get beaten down by the duopolists of this massive, critical commodity industry: oil.
Actually, PDVSA is making big sums of money (and not investing them in better extraction or refining). Chávez isn't getting beaten by any stretch of the imagination.

It's hugely unfair. The oil exists in one place, the market mostly in another. Any company which knows where the oil is, has the skills to extract it, and knows where the market is, can extend that market on its own terms (eg, SUV's), and owns the corner blocks where they can sell the petrol ... can dictate the terms of trade.
Are you trying to say that oil companies started the whole SUV trend?

But no matter, what you're trying to say is that oil companies lack capacity because they choose to, while I say they made mistakes in the past. Neither of us is saying anything about peak oil.

And don't come with the "it's not a monopoly because the oil companies have to compete with each other." You are old enough to have seen Easter prices on petrol.
Okay, first of all petrol and oil are two different things. The actual price variations at the pump are as much due to petrol stations as they are to production costs throughout the previous steps in the value chains.

Secondly you haven't actually given any credible evidence that there is some sort of global collusion - except for OPEC of course. And the companies in there aren't Shell, BP or Chevron, but state-owned and state-controlled ones.

The reserves in the ground are generally assessed by oil companies. They lie, the only authorities which will call them on their lies are other oil companies, so they collude with other oil companies to lie. Peak oil is happening, oil is a diminishing resource like domestic labor, the price goes up beyond the CPI from now on.
So that's your argument? How do you expect anyone to prove or disprove that?

This might happen by offering loans (from the treasury) at the CPI.
Interest free loans. Great, that will really get house prices down, won't it.

It might happen by the government buying property and erecting houses, then offering them for mortgage under non-profit (for govt) terms.
Again, all you do is restrict supply further. This is the same as rent control - you limit the housing available on the market, and instead add another category of those who get permission from the government to live on one of these blocks.

They did something similar in old East Germany with cars. People waited for ten, twenty years after having gotten their purchase of a Trabi approved before they actually got the car. The exact same thing is going to happen here: every renting household in Australia is going to run to the next government office and ask for a lot to own. Except that there aren't enough lots around.

It might happen by building huge quantities of "public" housing (a charity list where the applicants actually get a house sooner rather than later.)
That's the only realistic option. But it involves fitting more people on the same block of land. So forget backyards and spots for the car - think more Bauhaus.

I rather prefer the idea of making additional payments for the mortgage of your home tax-deductible. That way people can try and pay off their mortgages quicker, which should help reduce the financial burden on them without fiddling too much in the supply and demand itself.

Government can do that. What has your "free market" got?
A self-regulating mechanism. Doesn't need bureaucrats, taxpayer funds and angry protests on the street.

If prices rise too high, you end up without buyers and they fall again.

Hey, what the fuck kind of economist are you? Financial corporations don't give a fuck about their "home countries," except by some nationalist sentiment of the major shareholders or the board.
Huh? I meant that Australian lenders and banks might be more careful about securitising, selling and buying mortgages on homes here after what they've seen happen in the US. That whole mess only started when house prices didn't rise as expected in some areas - the same is feasible here.

Or you could leak what you have to one faceless representative of a stock-trading corporation. A company which does 'inside information' for a living.
Of course, insider-trading is illegal, but don't let that stop your rant.

On a personal note, I'm glad you lost $7K today. I hope it shakes your faith somewhat in the virtue and fairness of the stock market. I'm sure you did nothing dumb or unethical in your investments, but you got shafted anyway.
I'm gonna have to disappoint you. Strictly speaking, you don't lose any money until you sell. I haven't sold anything, so all I do is wait until they go back up. I did the same at 9/11, and came out all the better for it. In fact, I'm thinking whether I can scratch together some cash and buy a few more now that they're cheap.

So must everyone keep spending? Even those in debt? What kind of economic policy IS that? Can anything continue to grow in a finite system? Even if that's possible, is it wise?
They don't have to keep spending. It's just that when they stop, business sales fall and that feeds through. It's not economic policy, just a relationship that plays a big factor in many recessions.

But where did you get the "finite system" from?

ASX is down again today so far, eck ...

Pretty much, yes. Or they were otherwise constrained by issues that weighed heavier on their minds (investor returns, for example).

It baffles me that you can see the free market as the best available method to ascribe value to a commodity or a corporation ... but whenever you see an example of a corporation making a market-irrational decision which favours itself you say "oh, they made a mistake."

Are we seeing new players taking advantage of the lack of excess refining capacity by building new refineries? Suspiciously, we're not (unless you count government-owned Chinese refineries.) No, everyone is just waiting for the existing owners to build more.

The refiners have too much vertical integration (downward anyway, into retail) to be seriously challenged by new players. They don't need to compete fairly, and they damn well don't.

Actually, PDVSA is making big sums of money (and not investing them in better extraction or refining). Chávez isn't getting beaten by any stretch of the imagination.

Indeed, spending that oil money on popular programs is working well for him electorally. Whether he gets away with it in the long term remains to be seen. I have to agree that underinvesting in oil infrastructure is a bad mistake (one Iran has made too) but I'm sure he has sound advice if he just chooses to listen to it.

In Venezuela and in Iran, you would think that simple national defence considerations would be enough to justify proper investment in all stages of petroleum production. Perhaps they are just "making mistakes."

Are you trying to say that oil companies started the whole SUV trend?

That is perhaps going a bit far. There is some cross-ownership of US car manufacturers and US oil companies, and the two industries have grown up together ... but no, I guess I was wrong about that. (I came into possession of a litre of Cointreau yesterday ;) )

Four-wheel drives were among the first cars ever produced but weren't popular until the US Army Jeep and the British Land Rover, both of which were light fuel users for their day, considering the fuel-usage overhead of driving all the wheels. Both had a 2WD mode for road travel.

The modern SUV trend (driving them in the city) probably springs more from a consumer-driven muscle-car ethos, one of conspicuous consumption. The option of taking them off-road is more a marketing gimmick than a real reason for buying SUV's. So I guess I blame the consumers for falling for that.

But no matter, what you're trying to say is that oil companies lack capacity because they choose to, while I say they made mistakes in the past. Neither of us is saying anything about peak oil.

OK, I should be more clear about what I mean by "Peak Oil." I do not subscribe to the Peak Oil extremist case, that there is some crisis point where economies collapse overnight. In fact, modern economies are surprisingly resilient to sudden increases in the oil price -- that possibility is factored into projections about profitability.

For instance, if you were buying machinery for a mining company, or investing in a big ship, you'd be a fool not to consider that the oil price might rise faster over the lifetime of that investment than it has up to now. You'd have to at least assess the risk that petrol prices might rise so high that the machinery isn't worth operating at all.

As such, uncertainty about the future oil price discourages investment. Fear of instability in oil-producing regions is transitory, compared to a systematic increase in oil price (ie Peak Oil.)

Even someone who was not directly involved in trading oil could have predicted the rising demand for oil in China -- that's been obvious since Deng's reforms to state ownership started to take effect in the eighties. There's huge scope for growth in demand there, still, because their huge agricultural base is still largely to be mechanized. China uses one-fifteenth as much oil per capita as the US. That's only going to increase in the next decade.
(On a side note, I think China is actually playing a smart game by building those cheap and nasty coal-fired power stations. They got a break in the Kyoto agreement, they're exploiting it ... but also, instead of investing in long-term, expensive options like nuclear, they're going for a stopgap measure, banking on technological breakthroughs for their real future power needs, which will be enormous and can't be met by any current technology.)

One part of the Peak Oil idea I do accept is that getting oil out of the ground will become a lot more expensive as the Middle East crude runs out. OPEC isn't going to do us any favours, if anything they've been very restrained up to now (perhaps to discourage exploration and drilling in non-OPEC countries.) Their quotas have been pretty much the same for thirty years, only going up or down by ten percent or so to respond to demand or the loss of demand (eg the Asian recession).

But having looked into it a bit more closely, it does appear that the current high oil price is driven more by demand than by restricted supply (as the oil shocks of the seventies were.)

If you believe in the market, look at oil futures. The longer they are, the higher. On the other hand, if you are convinced that a high oil price will stimulate new production and oil prices will return to 90's levels, put your money where your mouth is and buy oil short.

I think you're just being optimistic. Oil is a limited resource, demand is increasing -- prices will rise long before there is real scarcity of oil. In a way, that's a positive thing, it makes consumers more mindful of how much value they are getting from this resource, reducing wasteful use like taking two tons of steel up to the shops to carry home two kilos of food and nappies.

I don't resent the farmer who drives around his dry flat property in a 4WD (I wouldn't ask him to buy two cars to save money, and he needs the 4WD sometimes.) I don't resent the suburbanite without decent public transport who drives for an hour to their workplace in an industrial estate with equally poor public transport. I don't resent the mechanized mines with their huge petrol-driven machines (it saves the lives and labour of men with picks) and I don't even resent the mechanized farms and the long transport routes of modern agriculture. All these are central to our highly industrialized economies, they are legitimate uses of oil.

But I do resent people who drive around in overpowered private cars, simply to show off their car. I resent people who take one-week holidays on the other side of the world, because they can afford to and the airline can afford to burn a single citizen's one-year transport allotment of fuel for a 400-buck fare. In short, I resent how much oil is wasted.

I spent most of today mowing lawns. I burnt four litres of petrol, but I don't feel bad about that because by any measure I invested more labour than petrol in the work. Needless to say, I'd have mowed a lot less lawn and been paid a lot less money if I'd used a scythe or a hand-push mower.

I do recognize the value of oil products to our modern quality of life. At the end of the day, I'd be happy to see petrol at twice its current price, or even four times ... and also I'd like to see plastic priced at its real value, not discounted as a "by-product" of petrol and other fuels. Plastics are fantastically useful in many products, but when we've burnt through all the oil they'll be far more expensive and we'll regret how much we wasted on throwaway items.

Okay, first of all petrol and oil are two different things. The actual price variations at the pump are as much due to petrol stations as they are to production costs throughout the previous steps in the value chains.

Yeah, I was wrong there too. I went from talking about crude oil to talking about petrol without even noticing I was doing that. (Probably had something to do with the half litre of Cointreau which went missing last night ...)

But I can rescue a point from that. If franchised petrol stations can collude to set an arbitrary price for petrol, and do it right out in the open (literally, on the street) and still not be prosecuted ... how can you doubt that the handful of refiners can control both the petrol price and the oil price?

Build one more refinery, and the price of petrol relative to oil drops, and drops in dollar terms too ... so more of it is sold. Meanwhile, the price of oil increases and the result is a loss of profit margin per gallon for the refiner.

You might think the lack of excess refining capacity is a mistake, but to me that seems rather odd. Building extra refineries but running them at less than full capacity would be obvious manipulation of the market (deliberately restricting the supply of petrol to raise the price, while keeping the oil price as low as practical despite rising usage, eg by China with their state-owned refineries) ... by not building refineries, the few players who have a choke-hold on refining in Western markets can cover this market manipulation with the excuse of "bad planning."

I simply don't buy it. Collusion is very difficult to prove, and collusion for the kind of money involved in the global oil trade would be extremely serious, very damaging for any companies proven to have done it. But the big crimes are the best planned ... and yes, I know that like all conspiracy theories this is unprovable.

But just like with the 9/11 conspiracy theories, look at who benefits and who loses. Refiners made a "business mistake" ... which increased their profits ... and the market is powerless to punish them. Refining bottlenecks cause price-gouging whenever there's a sudden demand (eg holidays, Hurricane Katrina, interruption of supply.) There is at least grounds for suspicion there, wouldn't you say?

Nor can any government afford to go digging for evidence. Big corporations have huge legal defences, you won't get a thing out of them without laying formal charges ... even investigating them could have bad effects on the economy and present the government as 'anti-business' because of the central role of oil and particularly refining.

Busting collusion in the oil industry makes busting tobacco or software or pharmaceutical market manipulation look like a walk in the park, and only European governments have had any success there. Easy for them, going after corporations which aren't ensconced in their own economies. Not so easy for the US government.

Big corporations don't give a damn for laws, and the more dependent the consumers are on them the more ruthlessly they behave. They really aren't much better than big bullies.

Secondly you haven't actually given any credible evidence that there is some sort of global collusion - except for OPEC of course. And the companies in there aren't Shell, BP or Chevron, but state-owned and state-controlled ones.

If I had evidence, I wouldn't be sitting here crapping on under a pseudonym. You'd see me on the news.

Interest free loans. Great, that will really get house prices down, won't it.

This post is already too long, so I'll just drop this. I can defend all these suggestions, but coming from a "human rights" perspective rather than a "compatibility with free markets" one.

We would strongly disagree, taking this well off-topic. Another day, bro.

I rather prefer the idea of making additional payments for the mortgage of your home tax-deductible. That way people can try and pay off their mortgages quicker, which should help reduce the financial burden on them without fiddling too much in the supply and demand itself.

That sounds like an excellent idea, no argument from me.

Of course, insider-trading is illegal, but don't let that stop your rant.

Sure, making investment decisions based on confidential information is illegal ... but disparities in knowledge are the lifeblood of investment. Where to draw the line between "good judgment" and "insider information" is tricky, even for a prosecutor.

Just look at how many politicians, on retirement, sit on boards for fat salaries. Their insider knowledge is damn useful even if all they ever do is nod or shake their head.

Knowledge of an impending coup in Pakistan is not insider trading in the legal sense, since it is not confidential information about a specific company. Probably the smartest move would be to sell the "investment tip" and pay a visit to your friendly US embassy ;)

I'm gonna have to disappoint you. Strictly speaking, you don't lose any money until you sell. I haven't sold anything, so all I do is wait until they go back up. I did the same at 9/11, and came out all the better for it.

What were you, like ten years old? Freak! ;)

ASX is down again today so far, eck ...

Well, I doubt our Reserve Bank will drop interest rates, so you'll just have to hope the US move is enough to turn things around.

I bet Rudd is getting a headache. "Going through government spending like a dose of salts" is kind of the opposite of a stimulus package. :D

It baffles me that you can see the free market as the best available method to ascribe value to a commodity or a corporation ... but whenever you see an example of a corporation making a market-irrational decision which favours itself you say "oh, they made a mistake."
It's as Milton Friedman liked to point out: we're not claiming the market is perfect, we're just claiming that there is nothing better.

I mean, I wouldn't even know who'd you have in mind to price-control crude oil.

The refiners have too much vertical integration (downward anyway, into retail) to be seriously challenged by new players. They don't need to compete fairly, and they damn well don't.
Maybe a clue to it sits in this graph: http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/ref_image_prof_rate.htm

If you believe in the market, look at oil futures. The longer they are, the higher. On the other hand, if you are convinced that a high oil price will stimulate new production and oil prices will return to 90's levels, put your money where your mouth is and buy oil short.
I have no doubt that oil prices will continue to rise. Demand isn't going to get less, and as you said getting the oil out of the ground will get harder over time.

But to me that is just the stimulus that economies need to make an ordered shift away from oil and petrol and towards alternative sources of fuel. I wouldn't try to invoke anything particularly negative when I talk about it, even though I do get annoyed when I sit at the pump and pay 145.9 for BP Ultimate.

I can't find anything like it for Australia, but I recently saw something for Germany (on DW TV) that split up the price of petrol into its components. It turned out that you pay just a few Euro cents for extraction and refining. A big part was added by the speculators after it reached Holland (bringing us to this price of crude we hear in the news) and more than half was actually tax. So rather than fret about the production of the stuff, if you want to ask questions ask them of the actual oil traders to whom oil is a piece of paper rather than a fuel and ask them of your government.

But I can rescue a point from that. If franchised petrol stations can collude to set an arbitrary price for petrol, and do it right out in the open (literally, on the street) and still not be prosecuted ... how can you doubt that the handful of refiners can control both the petrol price and the oil price?
Well, they don't really collude in the traditional meaning of the term. They don't talk to each other but rely on everyone behaving the same independently. And because we as consumers aren't flexible and knowledgable enough, breaking out and selling for cheaper doesn't really deliver a worthwhile increase in revenue.

Anyways, the ACCC is keeping an eye out. But maybe the most useful option would be to introduce a website that lists today's petrol prices for every station in the country, which people can look up or hook up with their satnavs or whatever - so that petrol stations are competing much more directly with each other.

... by not building refineries, the few players who have a choke-hold on refining in Western markets can cover this market manipulation with the excuse of "bad planning."
It's possible. Building a refinery is an expensive thing to do, and modern regulations wouldn't have made it any easier. While I'm not sure that they're trying to choke anyone (usually they seem to have enough to cover our needs, you don't really see full tankers waiting in line), they may well have come to the conclusion nonetheless that expanding capacity is not as attractive an option as paying a higher dividend.

Nor can any government afford to go digging for evidence. Big corporations have huge legal defences, you won't get a thing out of them without laying formal charges ... even investigating them could have bad effects on the economy and present the government as 'anti-business' because of the central role of oil and particularly refining.
That's never stopped a government before. A much, much weaker central government in the US broke up Standard Oil with very little meaningful evidence.

The problem is that you can't prove collusion if there is no communication between the players. All you see is that they did Action X and there is nothing illegal about that.

Sure, making investment decisions based on confidential information is illegal ... but disparities in knowledge are the lifeblood of investment. Where to draw the line between "good judgment" and "insider information" is tricky, even for a prosecutor.
The rule is quite easy. Traders are meant to work on information that is publically available. If there is the suspicion that they had something else, that can become tricky to prove if there is no physical evidence.

But it's hardly a big problem in the scheme of things. The difference between these traders and us is a few years training and the fact that they spend a lot more time digging for information that relates to their investments. Hence why many people choose to have someone manage their trading for them, for example by buying into a fund of some sort.

Well, I doubt our Reserve Bank will drop interest rates, so you'll just have to hope the US move is enough to turn things around.
It better not. Those inflation figures yesterday were terrible!

CPI at 3% for the year (which is the upper limit of the RBA's band), underlying inflation at 3.6 or so percent. I'm 90% sure they're gonna raise them by .25% again. Which will set off another angry discussion with my parents (who have just started on building a home).

I bet Rudd is getting a headache. "Going through government spending like a dose of salts" is kind of the opposite of a stimulus package. :D
The Australian economy doesn't need a stimulus, it needs a cooldown. At the moment it doesn't look like a recession in the US is enough for that.

What Rudd should be doing is going back on the promised tax cuts and cutting other spending as far as possible, except in areas that are causing the capacity constraints: infrastructure, skills training and more immigration. Alas, there isn't anything else that can be done about higher food and petrol prices - unless the ACCC finds something.

They don't have to keep spending. It's just that when they stop, business sales fall and that feeds through. It's not economic policy, just a relationship that plays a big factor in many recessions.

But where did you get the "finite system" from?

I didn't get it from anywhere but assuming that the Earth is a closed, finite system with regard to resources, and therefore products. That is, barring some pretty extraordinary breakthroughs that allow us to subsist on waste. I'm probably wrong, if I read your tone correctly, I'm nobody's economist, but I can't see how continual growth and continual spending (especially if one is already deep in debt), is possible.

Well the Feds dropped the interest rate by 75 points, with some analysts saying another 50 point drop might come in soon.
Here in Hong Kong the banks immediately dropped their rates. What it means is that I can get a mortgage for 3.25% right now. Since inflation is hovering near 4%, this means mortgages are being lent out effectively at -0.7% rate. Best time for me to look at buying (which I am).

We also had the all-mothers of dead cat bounce yesterday. Tuesday the HSI fell 2000 points. Yesterday it jumped up 2300, while every other market indice fell.
Go figure.

I didn't get it from anywhere but assuming that the Earth is a closed, finite system with regard to resources, and therefore products. That is, barring some pretty extraordinary breakthroughs that allow us to subsist on waste. I'm probably wrong, if I read your tone correctly, I'm nobody's economist, but I can't see how continual growth and continual spending (especially if one is already deep in debt), is possible.
Technology allows us to combine resources in different and more efficient ways, which in effect increases the amount of resources available.

There is such a thing as a "production possibility curve" which sort of addresses the idea of limited resources, and in the short term that's possible (hence inflation due to capacity constraints and the idea of an overheating economy), but in the long term productive capacity can increase through investment and technology does the rest.

I didn't get it from anywhere but assuming that the Earth is a closed, finite system with regard to resources, and therefore products. That is, barring some pretty extraordinary breakthroughs that allow us to subsist on waste. I'm probably wrong, if I read your tone correctly, I'm nobody's economist, but I can't see how continual growth and continual spending (especially if one is already deep in debt), is possible.

Yes and no. It hinges on technology and productivity; if productivity growth is high enough, resource consumption isn't going to increase considerably, greatly increasing the amount the economy can grow without hitting any meaningful barrier on growth. I mean, hundreds of years (or whatever that ultimate limit might be) are a pretty damn long time to figure out a way around it, and if we can't do so...

...well, that's the way natural selection works, I'm afraid. Either way, we'll go extinct if we remain only on Earth.

Well, I doubt our Reserve Bank will drop interest rates, so you'll just have to hope the US move is enough to turn things around.

I bet Rudd is getting a headache. "Going through government spending like a dose of salts" is kind of the opposite of a stimulus package. :D

Yeah, the Liberals (aka Conservatives) are disclaiming at responsibility for the inflation problem even though it was them who set-up the current problems.