do they mean depression?

[jensend]

http://www.financialpost.com/news/story.html?id=856044

i think this bailout has a pretty short life because the woes of the american (and others) economy are rooted in the consumer side of things. if you look at their balance of trade the usa has gone from a net producer to a net consumer. this is, to a large extent, offset by funds brought home from offshore businesses controlled by american corporations. the trend though is that america is living beyond its resources and will have to find a way to pay for all the imports. perhaps they can't afford to consume 25% of the world's energy.

[agstar77]

What part of living beyond our means do you not get? The next wave of prosperity will have to come with a GREEN tinge, it's the ENVIROMENT . Without a healthy enviroment a 100 in screen doesn't matter. I might add the concern for food will also drive the next wave.

[jensend]

i understand that north america is living beyond its means. i just don't understand why you think this is a great thing for farmers. yes, people are becoming more conscious of food quality and security but how long will it take to change current market structures to where the impression of increased food quality and safety means better margins for producers and not just increased profits to processors and wholesalers? if you want to sell at the farmers markets or out the farmgate it may work but the current market structure is what is standing in your way. as well, a downturn in the economy does not make consumers more prosperous so how many extra dollars do you think they can spend on food? if you're counting on futures markets to make you richer take a position because i think you've seen how fleeting and elusive those prices were.

[Zaphod]

I'm very bearish on the US economy and the impact it will have on Cda and other countries. We're due for a lot more pain yet. I'm still not convinced that commodities aside from gold will benefit. $1.2 trillion evaporated early this week, it didn't flow into commodities. I could be convinced otherwise, but I would think demand for commodities will drop if there is a depression, recession or collapse.

Can someone please tell me why commodity prices would go up? Is it because inflation will rise? If so, the gains in commodities would be limited in real terms.

[TOM4CWB]

Zaphod,

I agree about commodity prices dropping.

3rd world countries that have no money... or recession/depression economies... STOP BUYING FOOD.

India has gone without food before... a few more people starve... many folks go hungry... but consumption drops and prices then drop.

Folks in India and China don't need to drive new cars... a major driver into the future increase in commodities.

Change is the only constant in life... hold on to your shirt... its going to be a wild ride!

[cottonpicken]

It will be an inflationary depression.

The buying power of your dollars will go down.

Just like it did 3800 times before.

Does anybody really beleive that pensioners/fixed incomers will be able to buy more?Have a higher standered of living?

If gold goes to 2500 dollars,wheat will go up.IT is absouletly impossible for it not to.

What happened lately was a flight to cash.Look at the 30 day bond yields.

Those trillions sitting on the side lines and are losing purchasing power everyday and more and more are waking up everyday.

When nobody was looking the reserve injet 630 billion into the system,while everybody was talking about 700 billion bailout.

Its hard not to get caught on the spin cycle with the utter stupidity of our media today.

[Hopperbin]

Cotton is it safe to say that for every dollar that a person somewhere loses in purchasing power another person somewhere will gain a dollar in purchasing power? Is this all not just a transfer of wealth. The Indians and Chinese are gaining huge wealth. Just one problem, they do not spend it, they horde it.

[Fransisco]

One thing to remember is that a lot less of a persons income goes to pay for the basics now than it did in 1930. There is an awful lot of disposable income to burn through before people are going to cut back on food.They may eat out a whole lot less, but they're still going to eat.

I've been following Peter Schiff's comments and he always talks about how Americans are going to have to get used to a lower standard of living. He's probably right, but switching from driving your beemer from your half a million dollar house to Starbucks every day to driving a Chevy, living in a $100,000 house(or, gasp, renting!) and making your own coffee is still a long way from soup kitchens and bread lines.

Another commentator I read said its not going to be about the high cost of living, it's going to be about the cost of living high.

Lets face it guys what we grow and sell are not luxury items they are necessities.

I think cottons right, money is being parked in cash because of the uncertainty right now. Once we know what the bozos in Washington are going to do or not do the market will get back to doing business.

[charliep]

What are peoples thoughts about agricultural land values and the impact of current financial instability on them as we move ahead? I look at them from 3 perspectives - maybe others will disagree.

1) Value as an investment.

2) Value as a productive asset that generates profit potential/cashflow.

3) Ability to get credit to finance and cost (i.e. interest rates)

[Zaphod]

There will be a flight to safety, which will include gold. But when the economy goes in the toilet (I agree with Schiff on that point), oil consumption will drop. So will copper, beef and many other commodities. Some will still be essentials, like grains and oilseeds. But those still won't be viewed as safe bets. That's why funds like Ospraie, UBS and soon others are getting out of the commodities biz. Most people will be deer in the headlights and their net worth from equities will simply evaporate, not get moved to other asset classes.

[charliep]

Hopperbin

Will note your comments on China and India. 25 % (at best) in these countries are middle class as defined by them (not north american middle class). 75 % are subsistance (mainly farmers).

North Americas demands to meet our higher life style has driven by ability to get cheap goods from not only these countries but many others. As North America and Western Europe slows down, demand for these luxury goods will also slow. This will impact the developing worlds economies/ability to drive their growth. Already starting to see in the container market - less need for containers/boats on the ocean hauling stuff.

[jensend]

i understand schiff's reasoning and i don't disagree with it. whether or not there is weimar republic type of inflation or not depends how much money the americans (and europeans) decide to print. it seems to me that the burst of inflation in commodities we've seen over the past twelve months may have been enough to cripple the major economies and now things are in a prolonged deflationary slump. i don't know which way it will go but i do think we're in for some very tough times. inflation has not been very good to farmers or ranchers. when everything inflates (as we've just seen) it gives rise to increased financial risk and greatly increased cost of everything from inputs through machinery and energy. i guess i better get the horses trained better!