I May Be A Nobody Artist With No Fancy Schmancy Degrees In Economics

My God - It's another hockey Stick!!

Difference is, this one is true and will kill us all!

As Kate points out, this is only the beginning.

Being reasonably informed is becoming a burden. I find myself yearning for the ignorance of bliss.

This looks like a transfer of wealth to me.

Relax everybody. O'bomb-a, the Fed, Bank of Canada all tell us everything is under control. If your seat belts are tightened, you will hardly feel the bumpy ride ----- until we hit the wall!

"I find myself yearning for the ignorance of bliss."

Dyslexic moment. It should say:

I find myself yearning for the bliss of ignorance.

Inflation is on its way, in a huge way. We just might see 21% interest on mortgages again, a Trudeau miracle that has never (yet) been repeated.

I wish they would put the y-axis of such charts on a logarithmic scale. It makes it far easier to compare growth rates of today to those decades ago.

Don't Worry, Be Happy

What else can you do at a time like this?

We just might see 21% interest on mortgages again, a Trudeau miracle that has never (yet) been repeated.

Kevin, your level of bliss has got to be illegal.

By some estimates the leverage of U.S assets is as high as 50:1. It will take a lot more to buy fictional assets with fictional money.
By the way, Democrats are already indicating that they will funnel "stimulus" into their political programs. Welcome to the making of revolution.

Yikes, forget the seat belt strap on the safety harness. Obama is starting with a 1 trillion+ dollar deficit and the NDP under the brilliant leadership of Taliban Jack Layton would like to see the Canadian Government spend at least 120 billion dollars of borrowed money, co-signed by tax payers(of course), spent to 'stimulate' the economy. Billions to go to foreign owned companies, billions for overpaid GOOD union jobs and billions for transportation infastructure, all this to manufacture vehicles that according to NDP policies are detrimental to the environment so even if you buy them(which will be encouraged) they will not be welcomed as transportation vehicles by the eco-nazis. At least the new roads should last with pedal bicycles being the only vehicles allowed other than those LEGO smart cars. Hibernation will be mandatory for the everyone outside Toronto for the duration of winter. We will become marmots.

We've never been here before.
Thank you, George W Bush.
Thank you, Alan Greenspan.
You did a hell of a job.

If the problem is that there is too much money being printed then I offer to do the noble thing and will accept a few of these billions of dollars to be stored under my mattress until they need to be spent. In fact all of the people I know would also happily take a few of these billions of dollars out of circulation - we promise!

And then this added problem -derivative funds.
US billionaire Warren Buffett calls them the real 'weapons of mass destruction'. This market is worth more than $516 trillion, roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb". Gulp.

This new money has not yet hit the economy with its true impact yet. Most of the money has been loaned/given to the insolvent US banks. They have in turn used the money to buy US t-bills to shore up their balance sheets. They have not yet started to loan this money into the economy. When they do later this year because of fractional reserve banking the total amount of money created will be 10 times as large. Expect to see a whole lot of inflation in the future. This unfortunately will not solve our economic problems. It will give the economy a boost later this year but will ultimately just change what would have been a deflationary depression into a hyper-inflationary depression.

A no-brainer for getting rid of Mugabe: hire him to run the Federal Reserve.

philboyd; trudeau caused 22% interest rates and high deficites and Mulroney brought in the GST to pay down the debt.Obama took the Federal govt to court to force Freddie Mac and Fannie May to make the loans that started all this then the democratic congress put in the steps so that the CEO's could milk these institutions for millions.Bush knew what this would lead to and tried to stop it but the democratic congress stoped him.Maybe you should read something other than publications of the democratic party.

We've never been here before.

Thanks a hell of a lot, Jimmy Carter and Bill Clinton.

Thanks a hell of a lot, Barney Frank and Acorn.

You did a hell of a job.

Pelosi is a hypocrite and a she-devil.

One year from now most Americans are going to wish for GWB back in charge.Two years from now everyone will wish for GWB to be in charge.

The interest rate in the USA in '82 was 21.5%. I suppose Trudeau was responsible for that.

We have no other choice than to return the industry from China and India to North America.

It is better to look at that data on a log scale:

http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=AMBNS&s[1][transformation]=log

The recent increase is entirely in keeping with Bernanke's understanding of the 1930s and what the Fed should have done.

But agreed. There's going to be an overhang.

The first sign of smoke will be proportionately higher interest rates on long-term mortgages so lock in now.
How ironic for all the immigrants from third-world countries who thought they could find paradise in this life.
Some discomforting reading here - if you have a high pain threshold:
http://www.marketoracle.co.uk/Article2942.html

phil boyd - I believe spike 1 to be correct - this has been a problem long building in the US - in fact it can probably be argued that the US has been in recession for years now, and this was only masked because people were still able to tap home equity, prolonging the spending habits of the US residents.

As Peter Schiff says, it will take a long time to convert the shopping malls to factories. Debt in the 19th century US was used to build factories and a manufacturing base, debt for families now in the US is used to keep up with increasing health care costs, child care, transportation costs (suburbia), and mortgage payments (see the work of Elizabeth Warren, excellent vids on YouTube). Government sponsored enterprises are pretty dangerous and ultimately damaging . . . . . Cheers!

Soccermom. Bush came into office with a surplus on the books. In 8 years he's pissed it away and then some.
Come to think of it, Harper came to power with an even healthier balance sheet. It only took him three years to piss that away. Ain't conservatism wonderful.

Did you ever hear of a fellow named Jimmy Carter? The US was going down the tubes with him.He and Trudeau were cut from the same cloth.

Gee, spike, and here I thought Reagan was president in '82. In '79 the interest rate was 11%.

pillboy, the imaginary balance sheet you believe was left by the liebrals was achieved by off-loading financial responsibilities unto the provinces but mostly by GRAND LARCENY, as in the THEFT of over 54 BILLION dollars from the EI FUND that had been stolen from workers and especially employers by years of overcharging. Even the courts found this move was ILLEGAL.

If you don't spend your money, then the government will spend your money on your behalf.

All hail to those who know how to run your life better than you do.

The type of brilliant people of which philboy obviously imagines himself to be.

Martin got a surplus by transfering Federal govt responsibilities to the provinces and cutting govt funding for research for agriculture and industry.The liberal govt then put in programs that had to be paid for by the provinces and individuals.These programs are better refered to as UNFUNDED mandates.To make an example,cities that force homeowners to clean city sidewalks with no reduction in their taxes.

Philboyd,

Yes and Labour driven UK has put itself in a position where it cant raise axes, because it never cut them. The UK is on the verge of bankruptcy and default. Ain't Liberals and Socialists wonderful!

Quite frankly the cons could do nothing and things would return to some level of normalcy, maybe 6 months later. But they wouldnt survive and we would be stuck with a "da colaition".

As for the monetary increase....it is huge, and it is what is supposed to, and likely will bring growth back. It is also easier to mop up that money than it is to pay off the debt being incurred.

I have less trouble with that graph than I do with a deficit and debt graph. Inflation is a bad thing, but less bad than deflation. The amount of money being destroyed in the "crisis" required an infusion. We will get inflation, and there will be a devaluatio of the USD sometime in the next couple of years.

If Obama is lucky enough to avoid that then he better drive it to surplus and pay down some debt, I wouldnt count on the Chinese forever, not because the Chinese will refuse, they wont be able to and will be worrying about their own internal meltdown.

Let's see how many Chinese workers are asked to stay home after the new years is done. If you have friends or contacts in China, stay in touch. They will give you a better sense of things.

There have been riots in China, there will likely be more, and bigger ones in 2009.

Pillboy
Conservatism is grand,thank you very much.It sure beats the hell out of lying and stealing Liberal ways.As for the balanced budget,the liberals balanced these budgets on the backs of the tax payer,slashing essential programs like health care and introducing useless boondoggles like the gun registry.I'll take conservatism over socialism any time.

So philboy, you're saying that massive spending by government will fix the problems? That hiding Gov't debt with skillful accounting, a la Paul Martin/ Bill Clinton, works to create a great economy.

philboyd: "It only took him three years to piss that away. Ain't conservatism wonderful."

Surpluses are nothing but over-taxation. Reducing that surplus by taking in less in the future, what you call pissing away, is conservatism and yes, it is wonderful. However, if you think the government needs to have more money, they will cash any cheque you send them.

philboyd - the problem has been longstanding in the US. The US debt has grown nearly logarithmically until just recently, a few blips here and there with different presidents, but more or less a straight line on a log plot.

I'm not sure how much one can compare the macro to the micro - but I would say that it's just like me borrowing a ton of money every year to fund my consumption, not really planning to ever repay it, and calling myself wealthy because I can keep up to the monthly interest payments.

Another problem is that we're theoretically supposed to save in times of plenty (macro and micro) - but special interest groups have been successful in extracting tax monies - because times are good, right? Spread it around a bit.

Surpluses are nothing but over-taxation.

So deficits must be under-taxation, no?
Besides, surpluses are a fiction when one is sitting on a massive debt that must be serviced.

Philboyd;In China under Mao,someone asked him how a certain program would work and he replied"ask me again 30 years after its implemented and I will tell you".In Canada it took about 30 years before the the policys set in place by Trudeau to really take effect as in a litigieous society and overpaid civil servants.In the USA the agreements between the auto makers and the unions made in the late 40's and early 50's are coming home to roost in 2009.

Kevin ...it will take a few years for deflation to run it's course. Financial deflation is only a visible symptom of the old systems going into the process of decay. The industrialized (mass) democracy runs into the twilight. There will be a run on Sterling, on U.S dollar, people will loose faith in their governments and thus currencies issue by those governments.There may be or may be not hyper-inflation before collapsing of the current monetary system. It is very hard to predict exact scenario of turbulent historical times. The idea of hyper-inflation feeds gold bugs, but you can not replace food with gold.
The wise people from the past knew that any society is three days away from hunger.
Regarding stocking on ammo, it would be most sensible of PMSH to grant Canadian citizens basic human right to safety and security by allowing to arm themselves. If you think this is ridiculous, ask yourself a question what will happen when your city or province will not have money for policing? What will happen when due to economic hardship the police will become either corrupt or ineffective?
So far the Canadian conservative government is clueless, narrowly focused on winning (not loosing) elections. Perhaps, they will wake up or ..perhaps they have to play its assigned role in history.
Am I an alarmist? Yeah, I guess so, the situation is more alarming then optimistic.

A trillion here, a trillion there, and pretty soon you're talking real money.

A royal commision to Zimbabwe might help. We need to know how to get all those zeros on our 1 trillion dollar bill. Maybe if you make them small enough they'll fit.

Citigroup, the recently rescued just spent 50 million on a shiny new corporate jet. Made in France no less. Nice plane. via gatewaypundit

And - to comment on the Pelosi article - once you view your citizens as "cost centres" to be reduced, rather than an "economic engine" to be grown, your nation is (the word that starts with f)

Where does one go to have a phony, sickly, silly smile permanently engraved on one's face anyway?

And, what the h3ll does she have to smile about??

Philboyd: "Besides, surpluses are a fiction when one is sitting on a massive debt that must be serviced."

I assume, then, that you've agreed with the Conservatives' practice of applying their surpluses (massively) to the national debt for the past three years. But you've also said that Harper "pissed away" the surplus. You'd better go back to your index cards to look for a new argument.

"So deficits must be under-taxation, no?"

No. A deficit is over-spending...something lefties excel at.

Okay, serious question here: What can a family do to weather the coming storm? Seriously? I'm not interested in placing blame for the mess right now. It's already happened. How do I survive it?

Any serious suggestions? (And please don't tell me the government will save me.)

Philboyd,

deficits can be undertaxation or overspending or a combiantion of both. Surpluses are overtaxation, since spending by government is a choice.

It is all contextual. We are at the low end, actually the bottom, of the G7 in terms of Debt to GDP. So we have some flexibility to increase debt.

The problem with surpluses is that they get abused by the government of the day, especially if they are significantly large. This is the epitome of tax and spend.

Given that situation it is better that governments lower taxes and or pledge any surplus 100% to debt repayment in that budget year. Unplanned, last minute spending is the issue.

And for all the debt the US has, it has lots of taxing room, should it choose to use it. There is an argument that the US is undertaxed, I am not saying it is true only that there is a decent debate to be had.

I raise theUK again, because they didnt cut taxes and now they are totally boxed in. There may well be Tatcher like cuts to services or default on UK bonds.

If Canada plays its cards right then we can become a haven, we already are, sicne things are far far worse in the US and the UK.

Harper did crank up spending, of course I always heard it wasnt enough from the opposition but taxes have been cut. An infintely better situation than taxes not being cut.

The US has a better chance of wriggling out of this than does the UK. But Bush, who never cut any spending, definitley put them in a corner. Like Bush 41 and Clinton, Obama may well raise taxes a little. Wont take much, the US is an incredibly wealthy society.

Nancy Pelosi must have an incredibly strong skull. It must be a medical miracle that someone who has absolutely nothing in her head does not have her skull implode into that empty space.

Philboyd - Think Freddy Mac and Fanny Mae. Then think Barney (sweet cheeks) Frank. GWB pressed the Democrat controlled House Finance Committee to institute some regulations and restrictions on the copious and huge loans they were making to people who otherwise were not credit worthy. Democrat after Democrat rose up and protested any changes because everyone who wanted a house should be able to get one. They did not want to see any changes and NONE WERE MADE.

In the end - when the rediculous "sub-prime" chickens came home to roost - it all came down like a house of cards. See if you can follow the progression:
- Freddy and Fannie are there to provide liquidity to the mortgage market.
- Some financial rocket scientist dreams up this scheme to provide housing money with a "sub-prime" interest rate - but for only a couple of years.
- Freddy and Fannie make loans to people who are not otherwise credit worthy but hey - don't worry - the interest rate is cheap.
- NO DOWN PAYMENT NEEDED!!!
- Interest-only payments are an option.
- Money is flowing like the Mississippi - folks are buying homes.
- House prices are going up and up and up.
- More folks are now buying even more expensive homes (not bigger or better - just more expensive)
- The "sub-prime" period is over - Time for payments to increase.
- Non credit-worthy folks can't meet the new monthly payments.
- Folks stop paying their mortgage - mortgage in default. People walk away from their (actually Freddy & Fannie's) house.
- F & F become the biggest owners of real estate in America.
F & F have alot of bad debt on the books.

The point is, philboyd, GWB was not the guy who made the rules on this. It sits on the lap of Barney Frank and his band of idiots.

My argument, MJ, is the massive deficits Harper is about to commit this nation to, after pissing away
the surplus on ideological tax cuts. The numbers don't lie. It is what it is.
You can't put lipstick on that conservative pig.

.. if I had a rocket launcher,
I would not hesitate.

Bruce Cockburn has such a, how should I say it, ethereal way with words...