Friday, October 24, 2008

A Global Oops

As Monty Python said, "nobody expects the Spanish Inquisition." I don't want to make light of what was a historical abomination but nobody expected the already puked out market to spew some more. Retest - yes. But it is happening too soon to be valid.

The stock market barfed overnight and my view that good long-term values are to be had is going to take a beating today.

What I am reading now is talk that hyperinflation is now possible with the term "Wiemar" being tossed about. The Wiemar Republic was in Germany nearly a century ago and people were feeding their fireplaces with cash rather than the more expensive firewood.

Iceland, thanks to its financial crisis, just chopped its interest rate 2.3% to 12% and that means it is effectively giving up on fighting inflation. Hungary just raised its rate 3% to defend its currency. Clearly, the global economy is fighting for its life.

Can we have a recession here with inflation? Here is a quote from the biggest gold bug on the planet - James Sinclair.

"Yes, a planetary Weimar is on the menu. Russia, the Middle East and China may just be the top survivors. Africa might just come into its own in such a scenario due to the amount of raw material and gold resources they have."

I am hurting on my own gold investments now but it is a small price to pay - just in case.


Doug said...

i thought we would get a better rally to signify the bottom, leaves me a bit unsure if we have.i think we have, the market rejected the lower prices at the open, there has been so much selling over the past few weeks im thinking the cumalitive amount is enough to allow for some kind of rally for a few weeks.

patrick neid said...

Wiemar Republic? I don't think so. These guys are pounding their books on gold etc. The Bubbles, long predicted in oil, housing and commodities have burst. In turn this had flipped the domino chain of derivatives causing technical defaults in the banking system.

While most pundits, between screaming fits, think there is extreme danger with the markets collapse they continue to show their utter econ stupidity by not realizing that the greater danger, the one that they embraced, were the bubbles.

True these are difficult times with so many going splat at once but the markets will recover as they did after the Panic of 1907 and the similar contraction in 1974. In fact in both those cases the markets were back at the old highs within two years. Right now that looks like a stretch!

If we leave housing alone, let the foreclosures speed ahead, buyers will snap them up as they are already doing across the country. Losses will be taken and the solvency issues plaguing banks will end and the lending issues will be resolved. The market will bottom and hopefully we will all have learned a lesson.

We won't. There will be other bubbles. Count on it. It's human nature when it comes to easy money.
Home owners, you are not going to believe this flower I found in Brazil....

Doug said...

the thing that i can't get over is the same philosophy that got us into this mess is supposed to be the remedy? was it not "handouts" to unworthy people(no jobs,income, assets,etc) in the form of risky mortgages that started this mess. the solution being that we are going to punish the responsible hardworking people by taking their money and we are going to give it to the unworthy(no jobs,income,assets,etc), this is how we are going to get the economy back on track? we are going to build the economy from the bottom up? Like Limbaugh says "if that were the case then mexico and cuba should be economic powerhouses."
i thought about it this week i would rather have a job from a greedy boss than no job at all.
but i don't want to get political...

Doug said...

let me get something else off my chest, for someone who is so committed to "spreading the wealth, its good for everyone" he lives in a pretty darn nice house and looks like he owns his own plane. shouldn't he be flying commercial and live in a more modest house or even a trailer? he wants to spread everyone else's wealth, just not his own.....

Michael Kahn said...


I am with you. Let the free market work. It will be painful and innocent people - those who were talked into bad mortgages by crooked bankers and not those who were playing the flipping game - should have some recourse, What, I don't know.

Michael Kahn said...


Aside for the "non-political" post, I agree with your comment that we cannon send the same bozos who broke it in there to fix it. And that ties back to the previous comment about letting the free market work. We are throwing good money after bad ad funding executive vacations at AIG.

I am not opposed to help at the individual level but for keeping people fed, warm, dry, clothed and educated. Home ownership is not a right.