Should we be worried yet?

Discussion in 'Financial Cents' started by VisuTrac, Oct 25, 2012.

  1. VisuTrac

    VisuTrac Ваша мать носит военные ботинки Site Supporter+++

  2. Seacowboys

    Seacowboys Senior Member Founding Member

  3. mysterymet

    mysterymet Monkey+++

    Been worried...
  4. DarkLight

    DarkLight Live Long and Prosper - On Hiatus

    If you aren't worried yet (at some level) then a) it's too late and b) you haven't been paying attention.
    oldawg likes this.
  5. oldawg

    oldawg Monkey+++

  6. NWPilgrim

    NWPilgrim Monkey++

    I am beyond worried, now in suspended disbelief it has remained propped up this long.

    Generally when the rats start jumping ship the waterline approacheth close behind. Two years max for the breakdown.
  7. TheEconomist

    TheEconomist Creighton Bluejay

    I think there are many reasons to be scared by what is going on in Europe and internationally. First off, IFRS follow fair value accounting in large...this leads to some issues in commodities markets like gold.

    Fair values have a few issues attached. First off fair values offer companies a means to leverage themselves for credit worthiness. A company could use fair value accounting to make it appear that it’s capable of paying back a loan when in fact it is not. Secondly it is risky to use fair value accounting figures in a volatile economy such as the one we are in today as it could result in rapid fluctuation or depreciation and appreciation leading to other problems.

    This causes problems when the gold is moved to market and the market has run away from the historical value and fluctuates due to volatility. In some circumstances, the 'fair market value" of some of precious metals can be less than the cash flows that are still being paid. This is why I have said diversification away from ONLY PM's would still be best in other threads.


    I think this is interesting to note when you are thinking about our governments current policies.

    Think about this:

    The governments current and past quantitative easing have focused largely on the purchase of mortgage based debt. I know this to be in large bad debt because of my current position. Add to this the move from private banks making loans to students to the US Government now handing our checks to students to pay for their educations with reckless abandon. I, like many others, believe that student debt will be the next sub-prime loan crisis/bubble. Not only will the government own a bunch of bad mortgage debt that it will and has already taken a hit on. But it will also own every penny of student debt out there. Add in the fact that new financial aid laws states that any debt that is not paid off after 25 years will be forgiven and we have a real problem. Who is going to pay for the debt? The taxpayers of course.

    So this begs the question: What happens when our debtors ask for their money?

    The answer is probably very similar to the one the German Central Bank, Bundesbank, received when they asked the Bank of England for 3,396 tons of gold back. Sorry chap, but we already lent it to someone else!

    I read an article today that stated that the US economy grew by 2% annualized this past quarter due in large part to government spending. When you take the above into account I fear for the long term sustainability of economic growth by means of QE.
  8. gunbunny

    gunbunny Never Trust A Bunny

    Thank you for explaining your position on this issue, economist. I was wondering why you were slightly anti-PM's. I respect that, but I'll still keeping ahold of my Au and Ag.
  9. UGRev

    UGRev Get on with it!

    Past the worried part. Past the caring part. WAY past the giving a shit part. Beyond the part where I think I can actually affect the situation. Currently enjoying the part where I slink into the shadows to watch the shit go up in smoke without being anywhere near it (logically speaking).
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