Rates may have not yet bottomed??
 

Article link here

I'll post the article below:

Wow, just wow.

Looks like we have a lot of failures to come yet. There are companies hauling for below their variable costs??? That's not counting there fixed costs. Jeezuz.

It looks like the banks at this point would rather stick there neck out for these companies because they don't want the trucks, trailers, or perhaps any real estate should the company collapse. That really gives a clue how bad it is.

I know things will eventually get better but it makes you wonder how far off it really is. I also wonder what the real unemployment number is, also people that lost their jobs but have taken something cheaper and don't have any "extra" spending money. Things just aren't moving.

Is that comes as surprise to you?

I wouldn't say a surprise, but with some of these guys saying the recession is over and the fact that trucking generally recovers two to three months ahead of other industries I think it's concerning news.

Just where is this recovery? I don't even smell a whiff of one.

Freight volumes actually usually lead the general economy by 6-9 months. Considering we are still seeing declining volumes in both trucking, intermodal, and rail, I would be dubious of any recovery claims.

We'll see a slight uptick in volumes this Fall due to inventory replenishment, but it will barely register as a blip due to continued oversupply. Until consumer demand actually picks up sometime next year, rates will continue to be ugly.

If it weren't so serious I would have laughed when I heard that the recession was over. I don't think we have seen the bottom for rates. I still see too much capacity and not enough freight. At least we do have freight, just not enough of it. You can stay busy if you want to run for $1/mile. You just won't make any money. We still need to hunker down, keep costs low and negotiate for the best rates we can get. If you think that you will be able to survive on $1/mile freight you will have a rude awakening. The politicians want to put a positive spin and make the citizens think that their stimulus tax has done it's work. They hope to quash any opposition by convincing the citizenry that the recession is over and things are getting back to normal. I don't see things getting much better until at least some time next year. Until we lose more capacity we are not likely to see rates turn around. As we head into our slow season you can expect downward pressure on already low rates.

It's not the politicians claiming the recession is over...at least not the ones that matter. Wall Street analysts are the ones making the noise and some European politicians, who may actually be right as far as they're concerned. If anything, administration officials have been more conservative than many in their assessments. The fact is, we are in better shape than we were six months ago, or even a year ago. Much of the unknown has been taken out. The stimulus debate is relatively pointless; it's difficult to prove or disprove either side of the argument. The worst of the fall is over, but we're in for a slow slog back up the hill.

Nothing is over, party just started....

There's still inflation to come and where is government debt.....

wait and see...

Things are better than 6 months or a year ago? The unknown has been taken out? That is a total load of BS right there. Unemployment might be going down but it's because Americans are taking jobs that were previously held by immigrants who have gone back home due to the economy. As Rosty said, those jobs pay much less so people simply don't have the money to spend, only enough to pay the bills.

My company is in construction and we are hoping to make it to Xmas right now. After we get our normal week off for Xmas, we may not have a company to come back to. I've talked with our majority owner face to face. He says he will do everything in his power to not let the company go under or close the doors to save his money. In his words, it would be too difficult to re-open if we did that. The unknown is still there..........as long as my job is still insecure I am not going to run out and spend money like crazy. I'm packing it away as best I can just in case the owner runs out of money before everything picks back up again. What I have heard, late 2010-2011 is when things will begin to take off with the economy. Commercial and industrial growth will stay stagnate until 2012-2013.

And the impact will be...?

We're talking the general economy, not individual circumstances. Do you remember what the economic outlook was 6 and 11 months ago? Nobody had an inkling of what was going on or what was to come. We know where we stand now. That alone is drastic improvement, it allows companies to plan. Things may look bleak regarding your own situation...that's not what I was referring to. As for your growth projections...sounds like a long slow slog to recovery to me.

The economy will be in a dump for a time to come.The only way to bring real economic growth ,will be by bringing back the manufacturing jobs the USofA has been losing for quite a while.This economy lived unrealistically on cheap credit until now,when the bill has come due.The only job growth i can see is through the energy jobs that have been talked about.Too bad the government has it's nose to deep in this.

As far as trucking is concerned,you guys pointed out what is goinging on. Hopefully,some mega carrier(S) will go under soon and that way freight will be avaiable for the small owner op.That's right let small business flourish and thrive,not the super big corporations that are being controlled by anybody in this world with the right amount of $$$$.

Fear & Desperation? Think I mentioned those factors in the "just say no to cheap freight" discussion.

Rail has been touting intermodal as a less expensive alternative to long haul truckload rates - and they ARE correct - it IS LESS EXPENSIVE to put the box on a train. If you are not under any predictable time constraints for DELIVERY, as a train pretty much "gets there, when it gets there". Seeing a lot of MAJOR CARRIERS boxes going by at RR X-ings. This is NOT a thing of the past, and we may see MORE OF IT in the future.

More boxes on trains means LESS boxes on trucks (duh), means carriers DESPERATE to stay in the game, that aren't BIG ENOUGH to load plan and leverage intermodal for the less time-constrained loads, will attempt to have rates that COMPETE with those of intermodal (which is foolish, as you CAN'T compete with a rig that can pull HUNDREDS of trailers at the same time).

Where WE used to think of intermodal as containers that come off container ships, go on trains, and WE drag them the last mile - there are probably more TRACTOR TRAILER type TRAILERS on these trains now, than ocean-going intermodal containers. And EVERY ONE OF THEM, means some DRIVER is NOT PULLING IT.

Oh yeah - we ain't seen NOTHING YET.

Rick

Intermodal satisfies one segment of the freight market. If time and service constraints are relatively lax, intermodal is a great way to go. A small carrier can't compete against the commoditized segment of the industry. The same goes for those trying to compete against the big carriers. You can't do it for less than they can and still make a comparable living. Why try? The small guy has to leverage those things he CAN do well and find his niche.

As a sidenote, intermodal volumes have fallen faster than truck volumes during this decline. Even when thing turn around, rail will always have constrained capacity. There is only so much rail out there. Yes, they're raising overpasses back east to allow the double-stack trains, but what are they going to do after that? With that capacity restraint comes pricing power. Rail's bread and butter is bulk commodities. Intermodal will get priced out before bulk because trucks provide an alternative. Obviously, none of this is a concern until things turn around down the road, but the fears about intermodal taking over freight are way overblown. The projections show trucks actually increasing their share of tonnage moved over the next 10-15 years. Oh, and a lot of those trailers you see on trains, especially the east to west trains, are empty trailers being repositioned.

yes I guess I think I know where we are at. lets see... the government has been telling us to reduce our debt levels, & at the same time put us in so much debt via this stimulus, that by just the tax burden we will have to face for decades to come, we will all be in debt... debt to the government, via taxes, though under different titles. the more responsible we are, the less responsible the government is. I am ready for a revolution.

Other than a brief respite during the Clinton years, that's been the story since at least the early 80's. No sense getting all fired up about it now.

Rail has limited capacity. Even if they start double stacking containers on these rail cars, they may need to reinforce rails to support the added weight. That takes time. Other than limited capacity, rail also has a service problem. They cannot give door to door service as can trucks. They also cannot meet the demands of the market as well as trucks. It can take 2 weeks or longer to travel across the country for a rail car when a truck can move the same load in 2-4 days. There are too many products that need to have shorter delivery times than rail can offer.

I don't see rail dramatically affecting trucking in the near term. Whether this country manufacturers or distributes their products they must be moved by truck. Even if it goes by rail, they still cannot get it to the consumer without trucks. It is possible we could have a little uptick leading up to Christmas. I expect consumers to be more conservative in their buying this holiday season. I don't see any more clarity in the economy than we had a year ago. People don't yet know how much their tax burden will go up with this out of control president and congress. They can't print the money fast enough. When people are scared they don't spend money. Spending would help the economy, but until consumer confidence returns they are going to hold their money close. Some people don't know if they will have a job when Christmas gets here. There is still much uncertainty. People have become much more suspicious of the congress and president and for good reason. I don't see any more confidence than a few months ago.

No more clarity? We're talking macro here, not micro. A year ago (almost anyway) we were looking into an abyss. Nobody knew if the banking system would survive, credit was locked up tighter than a you-know-what, the question regarding manufacturers was not who would go under but who would be left, and home values were declining at never before imagined rates. It's a night and day difference today.

As for taxes; outside of the self-employed, taxes have a negligible impact on planned spending. In any case, taxes aren't going to go up significantly enough to impact consumer spending in the short term.

but now... I'm ready willing & able. got my bunker built & ready to launch..

Better safe than sorry, right? LOL

This question does not even deserve the answer......If you dont know then you better not be finding out...

Oh, I know the answer. Better yet, I understand why the answer is what it is. Which is why I don't go running around like Chicken Little warning that the end is nigh simply because my favorite media pundit says coming inflation and mounting debt will bring about our economic demise. That's usually the totality of the argument. Which is why I gave you the benefit of the doubt and asked you to expand on your prediction...guess I should have stuck with my gut.

Don't get me wrong, I'm not saying things are good. I'm also speaking of the economic outlook in general, not just our particular industry. When I say we've seen the worst, I'm saying we won't see 6% contractions like we saw in the the 4th and 1st quarters. A zero growth quarter won't do much to change the current bad situation, but it's still better than a contraction. We've seen the worst, now we're destined to bounce along the bottom for awhile. It's a better situation but far from good.

As for freight and rates...maybe next year. I think the next two quarters could be ugly.

BTW, I'll sell you a reefer at the end of the year, lol.

Yeah, nice try trying to flip the script and make me sound delusional....what else you got, but for the sh!!ts and giggles just tell me what media outlet you are speaking about, everything i see tells me recession is over even though i think it has just started....

I do not need any media outlets telling me whatever you think they may tell me, i am looking at the facts behind the curtain my, ,,no worries'' friend, and the facts tell me that we are way too deep over our head with debt and printed money to just brush it off like you plan to do....good luck.
If you think its OK to run these deficits and debts and have a economy which purely relies on consuption where Americans spend money they dont have,and not production and savings, then its fine i guess...Name suits you well id say....http://en.wikipedia.org/wiki/US_debt...he_U.S._dollar

If it weren't for Chinese lending us this money, id ask you then how them rates R.


Now am going to put my tinfoil hat on... ... ...


...done !

You can tell how the economy is doing by looking at what is going on in the trucking industry. When there is plenty of freight then the economy is usually doing pretty well. There is freight, but there doesn't seem to be enough to go around and rates are still too low. Most business people with whom I talk are still concerned about the economy and most are not doing that well. I did make a delivery yesterday and the owner said they were doing well. I think we will know more how the economy is doing once we get into the holiday season.

This is my point...in all the words you've typed since my original question, you still haven't answered it. You initially said that inflation is coming and government debt is increasing. All you've done is reiterate those points. My question was, ok, what will the impact be? We've always had inflation. In fact, you have to have a certain level for a healthy economy. Just how much inflation are you talking about. Inflation is almost always accompanied by corresponding growth. Are you saying we're going to have stagflation or simply inflation that far outpaces the rate of growth or some different animal altogether. Inflation comes about from a weak dollar. Why will the dollar weaken substantially further and how far? Strength of currency is a relative condition. You can only measure the dollar's strength or weakness relative to other currencies. What other currency will fill the dollar's role as a reserve currency? Are we going to weaken against one in particular like the euro or the yuan, or will the dollar crash against all currencies? Why will those other currencies strengthen? Are they going to recover economically before we do and be substantially stronger?

And what of government debt? We've run massive deficits for decades other than a brief period during the 90's. The national debt has been staggering for years. What has suddenly changed? Where is the magic line that pushed us past the point of no return? Every other country with a significant economy has been spending massive amounts of stimulus as well. We are far from the only indebted economy. Indebtedness only becomes a problem when you can no longer service the debt. Have you seen the recent Treasury auction results? China continues to buy our debt because those purchases directly finance their exports to us. Their domestic markets are a fraction of their exports. In other words, without our market, their economy would be a fraction of its current size. And its current size can only barely keep up with the country's needs. They need us at least as much as we need them and probably more.

You make a simple statement like inflation is coming and our debt is too high. I ask you to expand and explain and you say the question isn't worth answering? I made the pundit comment because I've come across several people that have made similar comments. "High inflation and debt are bringing us down." When question them on why and how, they have no answer. They just say I need to listen to more Rush and Glenn Beck.

You may very well be right...but who would ever know?

There's some debate this time around that trucking won't actually lead the economy out, due to the unusual inventory cycle we're seeing. I'm not sure I'm buying into it, but if they're right, we won't see the recovery first. Like I said, by no means are we in good shape. But we are in better shape than we were. I'm seeing increased volumes all around. Rates aren't coming up, but rates usually trail volumes by a good amount. I happen to think we're just in a short inventory correction and we'll fall back down going into the holidays...we'll see. The business outlook in general is more optimistic now than it was 6 months ago. Many economists are calling for near 3% growth in the 3rd quarter. I have a hard time believing it will be that high, but the stimulus did have a substantial effect in housing and autos. I doubt it will hold up though.

All any of these economists are doing is guesswork. We can do the same thing. I am basing my guesstimates on my personal experience over the years. The main problem with myself and any of the pundits is that none of us have lived long enough to remember the crash of 1929 and it's aftermath. I still think that if we watch what happens in the trucking industry that we will have an indicator as to what is really going on in our economy. There are more loads than in the fourth quarter of last year and especially the first quarter of this year. Rates are down from a year ago, so that tells me that we are still in a position of over capacity. I would certainly not want to go into debt to purchase more equipment unless I could afford to pay cash and sit on the equipment for a while. I would not want to have to make payments during the next couple of quarters.

I have seen some rates come up the last couple of months in a couple of areas. One are where we sometimes haul the rates have dropped dramatically. A new logistics company went in and undercut CHR's rates and now they are too cheap for me to haul. They did tell me that they would pay if they could not move the load and it was late in the day. In fact, I was told that they would take money out of their pocket to move a difficult load.

I would be surprised if we had any real growth in the 3rd quarter of this year. And as far as the stimulus tax, I don't believe the auto rebates were part of that. I think that they added that to the expenditures. In fact, I am not sure that the housing discount was part of it, either. I think both of those programs came out after the stimulus tax.

I don't know of anyone in this business that is in great shape. I know plenty who are getting along as best as they can. I hope we all have a good 3rd and 4th quarter.

I thought it was self explanatory but i guess i was wrong.
Maybe I shouldn't only lead the horse to the water, maybe i should show him how to drink as well.
Ill do my best.....

Impact will be interest rates in near or above 20's, dollar replacement as the world currency reserve system (which underlines high interest rates as we would have to raise them to keep attracting foreign capital) and world de-coupling from American consumer which is broke. Economy which relies on borrowed money where its people spend $ that they do not have, is not real. We have hit NEGATIVE savings rate many times.

Yeah,in 07 was 2% when it was nice and calm. Is that what you think we've always had.

Only real inflation this country ever had was was in the 70's after the Brenton Woods agreement was scraped and dollar moved on to its FIAT status as a paper money. Paul Volker raised interest rates to over 20% to fight it off BUT here is a kicker....United States was a debtor nation and worlds leading manufacturing power which we are not today. Todays % rates are near 0 and what would happen if inflation starts to grow with no economic growth, are they gonna keep them at 0 to keep letting banks borrow cheap, or are they gonna destroy banks by raising them to fight inflation? Who will win?


Our economy is far from being healthy to withstand any level of inflation, and as our economy is 70% driven by a broke consumer, it aint getting healthy.

Only + thing that inflation does to the economy is reduces the level of debt by devaluing ones currency. BUT, if our 11 trillion dollar debt to foreign banks gets reduced in this manner than the world will loose confidence in our bonds and will start selling all at once just to get out of the asset that is depreciating in value, and it will not be back. In 70's inflation was over 13% which means whatever you have in the bank fell 13% in value. THat was a walk in the park.


So bigger the inflation, bigger the growth will be following it........
Great then, why not print up 10 more trillions and a have a hyperinflation hoping the growth will be at that rate as well...
Am talking depressionary hyperinflation with no economic growth. Federal Reserve as well as this entire country is in an uncharted waters as this has never been expirienced before and has it happened that the Feds balance sheet expanded in this manner. Right now Fed in the biggest bank in this country. They are not suppose to be involved in the market like Citi is or Goldman Sachs.


No it does not. Inflation means expanding money supply......
Inflation comes from Federal Reserve printing money, so called money supply rate or M-3 used to be published untill 2006 when they stopped.
File:Components of the United States money supply2.svg - Wikipedia, the free encyclopedia , look at the graph..
Weak dollar comes from new dollars that are competing with each other for the same product, thats why prices have to be raised to buy that product, leading to inflation. Everything comes from Federal Reserve. If the dollar was tied to gold we wouldnt have to worry about it as we would not be able to print it up.


US Dollar Index Thats the current trend of the worlds reserve currency as posted on Wall-street...
Why will it weaken? Are you kidding me?
It will weaken because of these trillions that have been printed out man?

Dollar index measures its strength against a basket of other currencies, not only one.

It does not have to be one, it can be many.....
Special Drawing Rights - Wikipedia, the free encyclopedia
This is what our biggest creditor wants BBC NEWS | Business | China argues to replace US dollar specifically.
Or Gold for that matter......


It will not crash, it will weaken substantially, enough to actualy reflect the real economic growth of the US, not our overbloated GDP which consists of Americans getting into more and more debt for our country to prosper. When the dollar becomes weak, investment will dry up and we will not be able to rely on foreign capital propping it up anymore. Reason why we are still able to keep % rates at zero is because of the foreign capital that flew here during the economic crisis where everyone was looking for a safe status, returns or not( reason why treasury CD's are paying 1%..) Slowly that foreign capital is flowing away from the US and thats why dollar is flowing downstream with it.....
When we moved from gold standard only thing that kept the dollar strong was the economy which was flourishing back then. There is nothing holding it strong now as we have nothing to back it up with, unless a new invention comes along and replaces fossil fuels for example....

New Zeland or Canadian dollars have something to back them up, Canada had vast oil resources as well as New Zeland. Other countries do not have fiscal problems we now face. Chinese citizens save most of their money thats why Chinese economy still grows annualy at about 8%. They grew even when we were contracting. When secretary of state was in China she encouraged the Chinese government to keep buying U.S. Treasury bonds. This is the mechanism through which the Chinese government keeps down the value of the currency or "manipulates" its currency, in the words of some commentators. Buying U.S. government bonds keeps up the value of the dollar and depresses the value of China's currency.
Thats the same thing that Japan has done for the past 50 years and now they have a new government in place.
http://upload.wikimedia.org/wikipedi...cent_share.gif Japan holds over 20% of our treasures buying them to prop up the dollar from going down....

We have never had these debts with these economic problems before. Debt accumulated after WWII had a reason to be there, we were in a world war. Right now we are accumulating debt just to stay afloat, thats why i told you where would your rates be if Chinese didnt lend us money.
What has changed you ask?
A'lot actually, our manufacturing base is all but gone, We were #1 steel producer in the world once when we had debt which was ALOT smaller then what it is now. We were industrialized power house and we had ways of paying off that debt thru production and exports, not printed money and inflation...

When Greenspan artificially lowered interest rates to keep the economy going creating a housing bubble. When credit was used to fuel up our artificial growth, when Americans stopped saving and producing, when our debt to earning ration reached these levels.....when we started measuring ourself worth by how many thing we owned and bought even though we didnt have any money, and still dont.
You ask when, it started 20 years ago. It moves slowly just like dollar will, nothing happens overninght but days of American dominance in the world are numbered, its time to pass the torch on to those who know how to apriciate it.


Only one country that has followed us is UK, everyone else has been saying that its a wrong idea. But you are right, we are not the only country in debt, others dont even compare. You cannot compare Zymbabve with US, or Bosnia. If you want to compare, compare us with Japanese, Chineze, Germans and other ,,developed'' nation. Nowhere in the little ,,book of economics'' does it say that the problem of debt can be resolved by accumulating even more debt. It is a LUNACY....

China is in the process of stimulating its own economic growth thru consumption. They happen to have 2 billion people who save everything they earn, compared to Americans who spend money they dont even have, and there are only about 200 million of our consumers. You happen to think positively on even holding auctions? We should not even have them, they are a bad thing, not good. China continues to make us their slaves when it comes time to pay the pipper and you think its good if we sell bonds fast?
What will happen when Chinese citizens start enjoying fruits of their labor, when they buy that new car, new television set, they wont have to prop up those who have lived off of their savings for decades, that be us if you didnt get it. They wont have to export, they will consume their own products and be independent of anyone while still keeping tabs on its money invested in the US. Americans cannot overconsume everything forever. We spend 25% of the worlds oil which means that the rest of the world gets by on only 75% of it..same hold true for everything else expecialy if money that their exports is spend on, comes from Federal Reserve printing press and credit cards, capital which holds no value compared to the capital of those nations who produce and save...

So they are proping up our bad behavior and it is OK with you. Maybe California should run up debt even more. It seems that everything is fine with current system in your mind. Refer to my previous response to this argument of yours which is full of holes like a swiss cheese.

I am Libertarian, i dont listen to American news media as they do not speak the truth. I turn to other news sources like that of my own which is completely based on logical thinking and reasonable understanding of the things that are happening around me. Only thing you need to do is look at the facts and if you like, follow your own instinct. I bought Gold bullion when it was 675 per ounce, it has hit over 1000 now but not overnight just like our own demise will not happen in the next year or two, but it will happen sooner than later and what that later is i dont know. You seem to still believe these same economists like our own Federal Reserve chairman when it comes to the predictions of our future economic ,,growth''. Well, here is little som-some for you to see.....http://www.youtube.com/watch?v=9QpD64GUoXw

You dont understand, i HOPE I AM NOT RIGHT( not when it comes to my gold investment,please..). I hope that somehow we will overcome it but the things that our elected officials are doing just kills even that little bit of hope that I may have. Tougher times are ahead of that am sure, so i would hope that you, and bunch of your other no worrie type of friends go out and start spending the money that you dont have, just so that i can make some more of that paper and pay my house off. Am almost there, just need 1 more year for it and a truck. After that its all yours.

Good luck

It is like an unemployed person who pays his bills by borrowing money. It only creates more debt, when there is no legitimate way of paying down the debt.

Eventually there will come a time when that debt will come due, and we will have no way of paying it other than with a dollar we are forced to make worthless by printing more than our economy can handle. Then hyperinflation sets in. Yay.

It wont happen in a year or two, but it will happen. Never has a money supply of one country jumped to our current levels in the history of the world without hyperinflation. look at Yugoslavia with Milosevic or Zimbabwe with Mugabe... People think that just because we are a super power it cant happen to us. Exactly for these similar reasons did the Roman Empire fell, USSR and Ottomans as well. They all thought they were indestructible and they were all brought down NOT militarily, but economically. When Rome fell people actually greeted Octavian s because they were miserable. They ruled 500 years. We rule only 60..

Million dollar question is, do we end up bringing down the economies of everyone who is heavily invested in us at the same time?

That is why dollar has been getting propped up for decades. It should have fallen right after its departure from the gold standard but thanx to Japan it didnt. World is heavily invested in the US, but capital has started to flow away and thats the reason why dollar has been getting weaker and weaker. If their investments are gonna go down thru the forms of inflation or weak dollar, it doesn't really matter. They will go down one way or another.

Vassago, we spent way more than a trillion dollars bringing USSR down, with that in mind, how is this for a scenario:
China holds over 800 billion dollars of our treasuries, they will buy more for sure but after their own economy is on a safe footing and self reliant thru its own consumption and exports to the rest of the world, they dump our bonds on the market. They dont care if they loose that trillion as it would bring them to a #spot overnight and their own currency would explode in value. They are communists, rule of law doesnt apply there and if their people have to suffer because of it, they will.
In the matter of hours dollar would crash and so would the US economy with everything we have ever accomplished and not a single bullet would be fired. People like No_Worries think that if people turn out to buy our debt, its a good thing because it shows the appetite for America. But they fail to see the other side of it just like thay failed to see our current economic troubles.


It is only when the tide goes down, one can see who was actually swimming naked.
Everyone looks good in a boom, its when the bust comes you see the true colors of all of these banks, managers and the country in general.

I dont think their economies will be brought down. People got the taste of being heavily invested in the US during this session of the economic downturn. They can only get smart from now on and look for that exit sign which shines all over Asia...

The major flaw I see in that is that we are their biggest customer. We are the biggest importer in the world (3 times as much as #2, which is Germany), and if our economy collapses, so does our importing. We are, however, the #3 exporting country (very close behind China), so frankly I can't see how it would be in their interest to purposely try to destroy us. They'd ultimately be destroying themselves as well. I don't believe China could take that kind of a hit.

Rev. what people miss out on that first point of yours is that we have been buying their products with the money that we do not have...credit is not real capital expecialy if it comes from the fed which creates it out of thin air, not savings and surpluses.
Imagine how ,,big'' our economy really is if we hold #3 spot as the worlds exporter, yet run 2 trillion dollar deficit. Thats the window into the US and just how over bloated everything here is. We just spend and consume.....and if we export this much, why is our deficit 2 trillion dollard. It should be zero.

No, i understand that point of view but just the notion that they have us in their arms even though we have bigger military and better tech than them, sends chills down my spine regardless on how you look at it.

China will eventually overtake us as the worlds biggest economy and i hate to see us being in dept up to our ears to them at that time. If they, and they will, stimulate their own consumption, they will not need us to buy their products. They will be self reliant as their own living standard would rise and ours would fail as it should. Fact that they are buying our debt is not a good thing, with it they are buying piece of this country and our elected officials dont seem to think so....

Discussions of this type are healthy and good.

Remember what is said here. China will self implode in the future. China cannot sustain it's current system. I predict this will happen in 10-20 years.

Oy! Where to begin...

We were a debtor nation in the 70's and we are still a debtor nation today. It's true that our national debt was at its lowest point since 1940 during the Carter administration (roughly 30% of GDP) but we still had substantial debt at that point. In fact, despite the rhetoric, our current debt level, at approximately 75-80% of GDP, is still well below the historical highs of 120%. Consequently, that period preceded one of the most prosperous times in our history. Bretton Woods collapsed in 1971. It's true we had high inflation in '74-'75 and '79-'81. Volker did raise rates to 20%, but they were at 11.2% when he started. That was also during the economic equivalent of Armageddon; stagflation. His primary mandate as Fed chief was to control inflation which he did, bringing it from 13.5 to 3.2 in two years. Of course it sent us into a deep recession, but we recovered and have not sniffed inflation higher than low 6's since.

What happens when you increase the supply of something? That's right, you decrease the value. So, inflation IS caused by a declining dollar. A decline in value can be due to either an increase in supply (your M3) OR a decrease in demand. Your definition relating to M3 is most often attributed to hyperinflation. Other than this extreme case, inflation is more reliably a product of supply and demand of goods. A simple cross analysis of your own chart will show that M3 is not a reliable indicator of inflation. It does coincide at particular points but fails to track the full inflation path. As a final point, there was inflation long before there was a Federal Reserve or currency.

OK, I just can't go back and address everything, so I'll stick with your predictions going forward. Your assertion is that we're headed for economic ruin, i.e. "depressionary hyperinflation" because of a rapidly expanding M3, unprecedented debt, and minimal manufacturing base...correct?

First, let's dispense with the talk of M3. The data is not released anymore so unless you're willing to go mine the various data points to come up with the number, there is no reliable number. Wikipedia is notoriously unreliable and when the chart you get from there is already an estimate, I hesitate to put much stock in it. But, we don't need M3 to predict inflation. Inflation WILL result from a weakening of the dollar due to declining global demand for dollars. Demand for dollars is due primarily to one thing; perceived safety. The reason that the dollar is the de facto reserve currency is because it is seen as safest currency. Will this change? Perhaps. If the World begins to doubt our ability to finance our debt, the chance of default rises and investors will look elsewhere. If you compare debt to income ratios around the developed world, the U.S. is near the top. And China? While the official figure is 17.7%, as with most Chinese government statistics, it is incomplete. Analysts estimate that China's true debt to GDP ratio is closing in on 60%. The Euro? Given their own debt issues and the increasing strain being put on eastern European members due to the highly valued currency, I don't look for the Euro to survive in perpetuity. As for your assertion that most countries aren't employing significant stimulus plans, let's look at the numbers:

China 6.9% of GDP
U.S. 5.5%
Japan 2.3%
France 1.3%
Germany 1.6%
New Zealand 3.7%
Spain 8.1%
Saudi Arabia 3.3%

The U.S. was not alone in launching massive stimulus plans. It's true that ours dwarfed most others in dollar figures, as it should given the relative size of the economies. The bottom line is that our debt level is not at the near bankruptcy level that the doom-and-gloomers and gold bugs would have you believe. The fact that we continue to have high demand for our paper is a testament to this fact. It is still more desirable to own dollars than any other currency for the purpose of reserves. As for China's noise about SDR's, that's old news. They made those statements leading up to some high-level meetings to try and bolster their position during negotiations. There hasn't been a peep about it in months. However, even if the dollar was supplanted at the World's reserve, it doesn't necessarily create a problem. Excess liquidity can be sopped up relatively easily. Like any other borrower, the World will continue to buy dollars so long as they thing they will be paid back. Which takes us into the true heart of the issue, the U.S. economy.

You're absolutely right, we have lost the bulk of our manufacturing base, the long-term absence of which would cause significant problems. However, there are two possible remedies on the horizon. One is the repatriation of industry. There were two primary factors in the massive expatriation of U.S. manufacturing. One was cheap labor, we can't do much about that. The other was cheap transportation. The days of cheap energy are over and with it, cheap transportation. When companies have to pay significantly more to bring their goods back to U.S. markets, many of the cost advantages of being overseas evaporate. We've already begun to see it in the last few years. Look how many foreign automakers now have plants here. The same with the steel industry. I believe we are seeing the beginning of a trend to bring capacity back into close proximity to the end user. Anecdotal evidence for this fact is popping up all over and this in the midst of recession.

It's true that Americans have overconsumed and that debt as grown too high. However, for your predictions to become reality, those patterns would have to continue. We have already seen drastic changes in consumer behavior and regulation is going to put the damper on the unfettered lending we experienced. At the end of the day, this will be one more in the unending string of economic cycles. Rapid growth is ALWAYS followed by a sharp pullback. Consumers, businesses, and governments adjust how things are done and we move forward again.

I'm glad you've made a paper profit on your gold purchase...how will you know when to get out? Me, I got out of the market in February of '07, got back in long enough to pick up 20% in March, and then remained only 30% invested through the Summer. I'm pulling out this week. I'm pretty happy with my returns and they're due to following the principles of the economists you hold in such disdain. As for your editorial comments about my spending and financial habits, you might want to make sure you know what you're talking about before ascribing particular characteristics.

I wish you luck in your future adventures, may you prosper like never before and all of your predictions come true...

We might get a couple of years where the economy stabilizes due to the bailout money, but like Rev stated it is like an unemployed guy living on credit cards. The bills will come due. Most of the tarp money doesn't get spent until 2010 and 2011. At the same time the next two largest waves of mortgage resets also happen at that same time frame. 2009 was actually a lull in the mortgage resets so any semblance of stability in the real estate markets will soon fade next year.

There is no way to know when this ponzi scheme, house of cards will collapse. It all depends somewhat on what no_worries alluded to with everyone in a race to the bottom. They are all devaluing their currency and monetizing their debts because there isn't enough capital to "sop up" all of this debt. The Federal Reserve has now been caught monetizing our debt even after stating they wouldn't do so. The 5 year treasury auction was a failure this week which is surprising since we are pretty sure the Fed has their buyers out there pushing up demand to try and convince everyone that China, Japan, India and others are not going to pull out of our debt markets. It is this 'artificial demand' that is keeping rates down by the Fed's own purchases behind the scenes. Everyone who is following this story knows it so how long do they think they can keep this up before they push everyone out of the markets due to this slimy tactic?

If you want to follow M3 shadowstats has a pretty good take on the M3 money supply... His numbers seem to be pretty close to what is happening, and the money supply has gone to the moon.

It is true that China isn't going to drop all their dollars and run. They will try to make this a gradual shift to preserve as much of their capital as possible. But the signs are becoming much clearer that the plans to run trillion dollar deficits going forward will not be financed on the backs of foreign investors for much longer. So where does that money come from? And what is the ultimate outcome? I see some interesting hypothesis here, and some of the same banter in the media. But does anyone truly know how this will unfold? We aren't the same country we were in the 1920's and don't have the resources we did then.

I have been modeling my data after the great depression era and so far it appears to be tracking, but I do have some concerns going forward. Our country isn't as well off today, and doesn't have the means to pick itself up by it's bootstraps because the resources don't exist today to do it. Debt as a percentage of GDP has only been higher during WWII. We aren't fighting a world war today. Secondly you just have to look at the chart of the exploding debt to see that this thing has gone straight off the charts in the few years. The government is addicted to cheap money, and if rates do go up because there aren't enough morons on the planet to buy that debt the government will not be able to afford to pay it's bills. It is pretty simple really in that regard. We were largely an agrarian society back then and people still knew life skills, how to survive, and how to feed themselves. I don't think we can say that about the general population today. So the potential for much larger scale starvation, sickness, and death is many times magnified today.

I am not completely sure that the near term will be inflationary as the bubble prices for everything based on those debts which cannot be paid are collapsing. The derivatives markets are still completely in chaos with somewhere between 500-800 trillion out there depending on who's numbers your using. Roughly 30% of that market is non-performing(ie trash). So you run the numbers and figure out how many hundreds of trillions of dollars in non-performing assets are collapsing. Then ask yourself what happens next? Does the government keep printing money to try to write off the estimated 200 trillion dollars in bad bets taken by the banks? Who exactly is gong to foot this bill? Our government and others around the world seem to think they can print their way out of this. Through monetization maybe they could pay off the debts by just printing the money, but not in the form of more government debt because most of the governments who have been suckered into this game of chicken are already buried in debt. So the near term is likely to be deflationary until they can throw enough funny money at the system to give it a temporary sugar high. But that money won't last long, and the effects are very temporary. And what about those investors who were buying our debt or the debts of these countries? What do you expect them to do? Just hold onto assets that are growing more worthless each day that the central banksters keep printing money in an effort to save their precious ponzi scheme?

So for those that think that the debt issue is a non-player I think you need to reach for your ears, pull until you hear a loud pop, because many of us have been talking about this for decades, regardless of who is in the White House, or which party thinks they are in charge. If you think about it we really have only been using this fiat money system since 1971, and in less than 40 years and we have bankrupted the nation. Too many people without some standard or measure to keep them in check will run completely out of control and that is exactly what has happened to this country and many others around the world. I am all for a gold standard, oil standard, some sort of limited commodity standard that our currency needs to be pegged against to control the supply of money and to reign in spending. Why there hasn't been a balanced budget amendment and a requirement to pay down the national debt can only be explained by bought and paid for politicians in the pockets of the banks and Wall Street.

So if you trust these economists talking all this smack then good for you. These are the same clowns that were telling us that the economy is fine, and didn't see this coming. Now they are suppose to be the experts you trust? Sadly I only wish we had the ability to pull back from the brink here, to pay down our debts, and restore some sanity regardless of how hard it would be in the near term. I just don't think either of the two political parties have the brains, guts, or tenacity to get it done which is why we keep getting the same nonsense no matter which one is is power. It will require a full fledged, OMG crisis before they will do anything. The only time they talk like they are sane is when they are not in power. As soon as they are elected they start off on mandates and "mission from god" that I don't recall getting much headlines when they were campaigning nor do they line up with the ideas espoused with things like "paygo", and smaller government, and reducing wasteful spending. It is all just a bunch of BS.

The next time your out cheerleading the party in charge for the latest emergency mandate which will cost an insane amount of money how about asking just how it gets paid for, and insist no more debt. Can we afford the latest proposals put out by the current administration? I say no way. But I am also one of those few that has been screaming about the Iraq war and the massive costs there. We cannot afford this nonsense. So put down your partisan mindset and stop defending stupidity. These morons in DC will bankrupt the nation and will be standing there next to these same Wall Street types, banksters, and economists and saying "We just couldn't see it coming". BS, absolute BS.

Stop looking for an angle, a scheme, an easy way out of this and grow up. Make the hard choices, slog through it all, learn the lessons before millions if not billions of people get killed by this corruption laden fraud being played out on a global scale.

It doesn't take a rocket scientist to see the banksters, international corporations, and governments all shuffling the deck chairs on the titanic all the while behind the scenes setting up an even larger global currency market, and even larger ponzi scheme. They will drive everyone to the brink and then offer the new solution as the savior, the answer. They will even try to make it sound sane with some sort of commodity backing, and "assurances". People need to wake up and smell what is being shoveled at us. This is nothing more than a massive power grab on a global scale. Send these guys packing, let them go broke, run off the vampires that are feasting on our stupidity. It is hard to imagine people with this kind of ambition, greed, and power, but it is what is happening.

For those defending the current actions of our Fed and government, were you defending them before the last election? Probably not, wake up, and put down the partisan BS. Our country is on the line here. You can be sheep or Patriots. It is time to demand fiscal sanity, and a serious right sizing of our government. If we don't do it soon, and demand that we pay down our debts, and balance our budgets(oh, and not steal it from Social Security and say the budget is balanced) there won't be a country left.

The so called boom years that have happened the last 10 years has been nothing more than a mirage of debt fueled by cheap easy money sloshing around in the system. Our way of life has probably been altered permanently. Until we get rid of our bubble mind set and start looking at what we have to work with now we are going to continue to make the same dumb mistakes that got us into this mess in the first place. Time to dump bubble brain thinking for sound judgement and thinking no matter how hard it is to swallow.

Transportation was a good leading indicator going into this mess. If we don't see signs of recovery in transportation then where exactly is the economy "recovering"? Until you see signs of life in transporation there is no meaningful recovery coming. Transportation has been the canary in the coal mine and so far it has been accurate. To add more fuel to the fire the consumer is 70% of the economy, please explain how you can have a "jobless" recovery? Stopping the decline, or not getting any worse is not a "recovery". The government thinks they can make up for the lack of spending by the consumer? That should be a neat trick considering the duration it will take for the consumer to dig out of the pile of debts if they even have jobs to pay those bills. Everyone cannot just declare bankruptcy and call it a day... Or can they?

Longsnowsm

We had greater fiscal restraints when we were on the "gold standard." In other words, we had hard assets to back up our currency. We have a history of getting into a major war when the economy goes this far south. WWII helped move us out of the last depression. Most of the elements are already in place. When we get into a global conflict it moves many from the private sector and unemployment rolls to the war machine. One major difference between WWII and now is that we produced most of our own food and products. Today, much of our military equipment is manufactured abroad. That could put us in a vulnerable position.