News Hong Kong Property & Finance

2013: What do you expect?

ORIGINAL POST
Posted by OffThePeak 12 yrs ago
What do you want & expect for 2013 ?


And WHERE ARE WE NOW.

Here's a sobering look at the US economy:

============================


When Priced in Gold, the US economy is at Depression-Era Levels

Business Insider



Buenos Aires, Argentina As we slide into the end of yet another year in which the nominal price of gold has posted a positive return, I thought it would be interesting to take a look back on history Guest Post: When Priced In Gold, The US Economy Is At Depression-Era Levels Zero Hedge


The results are rather startling. In its earliest days, US GDP per capita was a mere 2.6 ounces of gold per person per year. But this grew quickly, effectively doubling in the 20 year period from 1791 to 1811.

Most of the 19th century proved difficult for growth, as it took another seven decades (over three times as long) for GDP per capita to double again. This makes sense given that the 19th century was marked by several costly wars (War of 1812, Mexican War, Civil War, etc.)

An industrialized American economy began to take off in the 20th century; GDP doubled from 12.00 ounces of gold per capita in 1892 to 23.55 ounces of gold per capita in 1916. And by 1929, it had almost doubled again to 41.12 ounces of gold per capita.

We know what happened after that– years of depression and economic stagnation. The economy bottomed in 1934 at 14.93 ounces of gold per capita, and then it began a multi-decade rise, peaking at 139.05 ounces of gold per capita in… 1970. This was right before Nixon closed the gold window. And the economy never touched that level again. How interesting.

Since 1970, it’s been a series of peaks and troughs. The economy boomed during the 1990s, then ran out of steam quickly in the ensuring dot-com/housing/sovereign bust.

We have just ended the year at 28.40 ounces of gold per capita (based on trailing twelve month GDP data). This is an astoundingly low figure.

To put it in perspective, since the end of the Great Depression, US GDP per capita has only been under 30 ounces of gold two times– this year, and 1980. That’s it.

In fact, the post-war average for the US economy is 72.83 ounces of gold per capita, so the economy today is an amazing 61% off this historical average

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Read more: Read More


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COMMENTS
traineeinvestor 12 yrs ago
Hmm...thanks for posting but it's a bit difficult to take it seriously when they gloss over the fact that the price of gold was fixed at various times (and probably a few other factors).

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OffThePeak 12 yrs ago
Yes,

and there have been long times that some currencies - such as the yen - were better than gold:

2013 What do you expect image 1


But no more !

Many of these once-sound currencies are now being weakened intentionally by out-of-control money printing.

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traineeinvestor 12 yrs ago
While QE will most likely to end badly, it has either avoided a greater economic mess or delayed it (and we'll have to wait several years before we know the answer to that one).


Of course, money printing in one form or another is nothing new. Historically, the outcome has usually been inflationary to a greater or lesser extent with the combination of lower rates of inflation combined with increased money supply being generally associated with good economic periods and higher rates of inflation and increases in money supply being generally associated with periods of economic difficulty.


Guy Fraser-Sampson suggests that 6% inflation is something of a tipping point in this regard (at least in a UK context): Read More


Incidentially, his book is well worth reading - one of the few that focus on politicians incompetence and self-interest as the root causes of the economic crisis.

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Ed 12 yrs ago
I think in the short run - and in limited amounts - QE can be useful...


But when used as it is being used in enormous, never-ending amounts... particularly over a long period of time - I believe it delays the collapse (that was upon us in 08)... but that it will ultimately not work.


Throughout history it has never worked... so why would it now?


Also logically how can it work? If prosperity was to be had by simply printing more money - we could eradicate poverty overnight....







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Ed 12 yrs ago
Reward - Central Banks have printed 10 trillion dollars since this crisis started... the UK China Japan and US have all indicated they will print a lot more...


2013 What do you expect image 2


It has not prevented... it has delayed... the collapse...


What would be your benchmark for out of control money printing? When do you think we should start to get worried?

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Ed 12 yrs ago
Would that be Bernanke's book that explains his new economic system?


That's the system where when you can't borrow money from anyone you instead push a button on a computer and you create trillions of dollars - then refer to that as prosperity?


If this new system works then I predict Bernanke will win the Nobel Prize for Economics 2013...



So at what point would you say the money printing could be considered out of control? 20 trillion? 100 trillion?


To put how much 1 trillion dollars is in perspective with regard to the global economy see: Read More

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Ed 12 yrs ago
Unfortunately Reward... QE has only been tried once... you are confusing money supply with QE... totally different things....


"History isn’t much use in judging the therapy’s effectiveness. There has been only one significant trial - in Japan between 2001 and 2006. Excess reserves held by banks at the Bank of Japan rose from Y5 trillion to Y35 trillion, roughly 6pc of GDP."


Read More



QE is working so well in Japan that the new leadership believes that even more will work even better :) What did Einstein say about doing the same thing over and over again without getting a good result... but continuing to do that same thing over and over expecting a good result...


Of course - he called that insanity.


I disagree though - central bankers are not insane... they are desperate.


10 trillion and counting desperate 2013 What do you expect image 3

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Ed 12 yrs ago
Hmmm..... seems to me the Economists over the past 4 or 5 decades have not been doing a very good job no?


I am aware of only a handful who were warning about the subprime crisis...


My favourite economic theory of all time is Voodoo Economics - that's the one where you cut taxes... spend a lot... and borrow.... (and more recently we've added another facet to this theory... when you can't borrow - print... and print... and print.....)



Funny thing that subprime disaster... I had a fellow up here in my jungle hideaway recently installing some blinds... he moved back to Bali in late 2005 after running a similar business in the US.... I asked him why he left... he said the housing market was in ruins... there were no jobs...


I said hang on... I thought the housing market didn't start to seize up till 2007... he said no... it was seizing up in 2005...


Strange - Bernanke didn't know... the economists didn't know... bankers didn't know... nobody knew.... but the curtain man knew....


Two takeaways - experts know nothing... and are terrible at predicting... a crash can be in play or imminent and markets will not reflect this for years ....



Let's have a look at the genius Bernanke (he of the new economic system called Prosperity from Printing) at work prior to the crisis

(note the date on the first part of that video... that would be when the curtain guy was shutting down his biz and buying a one way ticket to bali)

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traineeinvestor 12 yrs ago
@ Ed


I agree that economists have done a bad job predicting the subprime crisis. As did the Fed, the politicians who encouraged it, the bankers and intermediaries who fed off it at the participants who speculated on it.


Even those who did predict it, have (at best) mixed records since then. Most of them called for things to get worse and got it wrong.


A reasonable (but not spectacular) read on why experts get it wrong so often:Read More


The main takeaways from the book are not to be overly confident and to spend at least as much time looking for reasons you might be wrong as supporting whatever views you hold. To a certain extent, I was reminded of the need to overcome cognitive biases that people like Kahneman and Zweig have written about.

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OffThePeak 12 yrs ago
Here's Nighthawk, who is a US farmer, talking about challenges that he is facing


(Reality Check - with Nitehawk - The Fast Aproching Storm)






"We had Food stocks of 18 months a year ago, but now we are down to just three months"

"Meat prices are down, because farmers do not want to feed their animals."

"Many farmers have sold their animals, and are now raising fish... catfish, etc."


"47.7 million Americans are on Food stamps. 1-in-every-6.5 Americans are on food stamps."


"Median income in the US has fallen for 4 consecutive years"


"2-out of 3 strip malls are closed... some malls are charging almost zero rents, to get people in

Now 51% of Americans are in the Lower Middle Class. It is harder to maintain a middle class income (but many people waste money.)"



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traineeinvestor 12 yrs ago
@ OffThePeak - thanks for posting. There seem to be some very mixed messages about farming with many farmers struggling for various reasons (low prices and water being the two I see most often) and others doing well (sometimes with the benefit of subsidies). There is also plenty of media/investor attention being paid to farming and forrestry type investments and prices have risen (at least from my far from exhaustive reading) which I find somewhat difficult to reconcile with the notion that farmers are struggling .


Of course, income reflects the current market and capital value future expectations (to put it somehwat crudely) and there will be considerable differences depending on the type or farm and its location, but even so, I struggle a little bit to reconcile high prices for farm land with struggling incomes for farmers.


As to the American stats, no arguement there - the American population is having a hard time and staying in the middle class (loosely defined has having the abilility to house, transport, feed, educate and entertain a family to a reasonable standard and save for retirement without material government support) is getting squeezed very hard from all directions.

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Ed 12 yrs ago
TI: I think one of the issues with farming is the cost of feed... the terrible drought in the US has made it too expensive to feed animals...


But of course since Global Warming is a hoax perpetrated by thousands of the best climate research scientists... this is of course a temporary problem (oops 2013 What do you expect image 4)



Food Stamps... isn't it amazing how the MSM never reports the monthly records of new people registering for food stamps... of course that would bust the 'recovery matrix' that they are diligently trying to portray...


America is going to crash - not a matter of it... but when

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Ed 12 yrs ago
OTP - thanks for that video... some pretty disturbing stats in there... it will keep me busy for the rest of the evening...

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traineeinvestor 12 yrs ago
@ Ed - food stocks and fertilizers (the latter is somewhat strange since many fertilizer companies are struggling on pricing and costs). Things will get worse if water pricing starts moving to a true cost basis which some have advocated.


One of the things we are seeing in the US is a redrawing of the economic class structures that characterised the post WW2 era - a large and growing middle class is being pulled apart by a number of factors and the result is that many are dropping further down the economic ladder while smaller numbers are climbing up to the point where they can withstand the economic pressures. The result is an increasingly polarised society.


While I remain hugely concerned about America's inability to control its deficits, the country does have some things going for it - not least a growing population and abundant natural resources.


Just to (partially) restore your faith in main stream American journalism, an article from MSN on food stamps: Read More


I keep coming back to the Australian model of compulsory savings (currently 9% with an employer match) and dividend imputations. They introduced these two measures in the 1990s and the result today is that the average Australian household has a net worth of AUD 868,000 (a record high) and net debt to household disposable income has fallen from 42% in 2006 to 35% today (with most of the increase driven by savings and asset price increases playing a smaller role). The result is that most Australians will eventually fund their own retirement. (Sorry, no link but it's on page 4 of the Australian Financial Review from 27 December, 2012 - part of my holiday reading.)

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OffThePeak 12 yrs ago
The Investment Behavior of America’s Typical Millionaire


These guys are supposed to be smart and thinking. They’re not, and soon they will find themselves among the New Middle Class, replacing the dying middle class that is now living among the poor in America

by William Dean A. Garner


EXCERPT

Here’re a few examples of the mistakes today’s millionaires are making in their investment future:

Investing more in US stock market(s), which are the engine of financial destruction for investors, especially during a Big Depression like we’re in right now

Investing in BigHealthcare and BigPharma (both promote killing patients)

Not investing in precious metals (this is such a no-brainer, but investors have been, and are being, scared away from the most important investment in modern history)

Not investing overseas (America is in fast decline, so this is another no-brainer)

Not investing in real estate (like precious metals, real estate is an important investment, even though there is no allodial property anywhere on the planet)

Today’s investment atmosphere among millionaires is counterintuitive to those of us who understand who manipulates the world’s financial markets and causes recessions and depressions, only to reap the spoils when the dust settles.

As I look on, I can’t help but shake my head at this careless behavior of today’s millionaires: so much talent, yet so little thinking going on inside the brainpan.

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/source: Read More

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hkxxxpat 12 yrs ago
TI: the Oz net worth sounded amazing, so I had to look a little further (could only find 2010 numbers but close). Total assets A$840k, but of that only $237k is financial, the other $583k is house/other prop /house contents / car. Plus numbers wildly skewed by the top quintile, for example fourth quintile (ie next richest 60-80% of population) only has $169k of financial assets. Taking say 5% in returns, less than A$10k per annum - per household (might pay to run the car?). Scary numbers I would think, even though better than other places, because doesn't the average couple need about $50k for a reasonable retirement income? But at least Oz has defined contribution pensions for most people, unlike the massive holes in UK and USA and other country pension plans. I guess this is a reason why AUD continues to rise, best of a bad bunch.


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traineeinvestor 12 yrs ago
@ hkxxxpat


Absolutely right that the numbers are skewed towards the top and weighted towards property but Australia is far less skewed in both respects that in many other countries (like the US) where the lower demographic groupings have even less and all but the very to are even more heavily weighted towards the value of their own homes.


I remain a huge fan of the combination of compulsory savings, flexible investment options (with default selections), employee control and defined contribution rather than defined benefit model. I really wish Hong Kong had adopted something similar.

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