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2008 was 'IT' and we survived. In fact it was the best buy low opportunity in my investment lifetime, dating back to the late '70's.
Not true. 1982 was an even better buy low opportunity. However, a big crash is the best time to build a fortune. The best time to buy is when everyone else is jumping out of windows.
I assume the OP means a Great Depression style crash. 2008 was it. We bailed out the banks forestalling the oncoming depression. That stopped the bleeding. It's not that hard to figure out. The reason the Great Depression was "Great" was precisely because thegovernment let the banks fail. When banks fail, money has disappeared. Gone. Between 1929 and 1933 U.S. GDP went from around $105 billion to $57 billion. That was a "collapse." Money just disappeared.
The banks were ready to fail in 2008-09. We stopped it.
Hard to say when it'll happen again, because a crash like that is notoriously hard to see beforehand. It's only easy to see in hindsight. We're due for a significant market correction before 2020. We are almost overdue now. I doubt that will be a collapse scenario though. But you never know.
Don't believe me? Here's just one small example from the "land of the free":
Say someone has an account with $200K. Lets say he decides he wants to withdraw $8K/month for a few months and add to his cash emergency stash that he has hidden away. Chance's are in the best case scenario, by month five he will get a notice from the bank stating his whole account has been seized by the government. When he contacts the government he will be told that its up to him to prove he withdrew his own money for legal purposes if he wants his money back. Great exercise of our given right of "innocent until proven guilty" right??
What law or decree has enabled this?
I read about a fellow who had 10K, give or take a few thousand, in cash on him. He was charged for violating some drug law despite there being no evidence of any drugs. I think the charges were dropped but I'm not sure.
I read about a fellow who had 10K, give or take a few thousand, in cash on him. He was charged for violating some drug law despite there being no evidence of any drugs. I think the charges were dropped but I'm not sure.
The law does have its uses when it comes to crimes related to DEPOSITING money. Its a favorite tool for criminals to launder money by breaking up large deposits into smaller ones and depositing money into their accounts. Once its in the bank account it would essentially become "legal" money. Tough money laundering laws have made this technique very difficult in the present day.
That's why I used withdrawing money in my example. Withdrawing small amounts of money was also restricted by these laws even though criminal activity related to withdrawing money has very limited use. However, it was intentionally put in so the government could use that loop hole to exert more control over people. Many people who are literally going about their normal businesses are basically getting their money stolen by the government because of this law. And it is an intentional act on part of the IRS. I know it sounds like a conspiracy theory but its not. In fact, these intentional seizures of innocent peoples money become so widespread that congress had to step in and pressure the IRS to stop legally stealing peoples money:
^^ The guy in this link had to forfeit $50K to the IRS in a settlement. This was even though the IRS didn't charge him with a crime or provide evidence that he did anything illegal. And he got this "great settlement" offer only after spending $150K in legal fees to fight the IRS.
Last edited by griffon652; 05-13-2016 at 05:50 PM..
Do you mean their investments might be in, you know, their own best interests??
Of course. A major problem right now is middle class jobs and wage stagnation. And trickle down is of course not working at this time. IMO we need to look at other central options, as opposed to the rich solving the problem in a free market manner. i.e. building more production within our borders, creating more jobs. Or through more taxing of the rich.
You say that as if it were a bad thing. It is good that central banks have talented people who actually know a thing or two about the real world rather than only career government employees or academics.
Apparently you have never taken a good look at what goes on inside of Goldman.
Remember Hank Paulson and TARP (the sun won't come up if we don't do this--and ten years later we have zero to show for it save for a bunch of zombie banks (and wealthy execs)...or the bailout of AIG which DIRECTLY put Billions into Goldman's coffers from the taxpayers, what that Goldman would otherwise have been bust?
Or when Hank called Blankfein to tell him they were getting ready to inject massive liquidity so Goldman could get their books in order to profit handsomely from a huge rally in Bonds and Stocks?
That chit goes on everywhere that Goldman has their hands in the pie, and it is first and foremost for the benefit of Goldman.
Read the Rolling Stones article about Goldman, the Vampire Squid. I know the inside because I worked on the Street and dealt with Goldman all the time. That article will give you some sense of their lack of a moral, ethical, and legal compass.
Not true. 1982 was an even better buy low opportunity. However, a big crash is the best time to build a fortune. The best time to buy is when everyone else is jumping out of windows.
Well not in my experience or opinion. 1982 was an excellent time, and 1982 was also the first year I became seriously invested. But of course we all have different strategies, viewpoints, timing and investments. In 1982 for me it was more serendipity of timing. For 2008 I appropriately planned and pre-crash was very defensive waiting for the right recovery signals.
"As I suspect you would enjoy it, I suggest you spend some time reading up on quantitative finance, computational finance, mathematical economics, quantitative international economics, and the like."
I live up n the woods which I'm sure presents a mental picture in your minds. However, at morning coffee around 5 AM at the coffee shop we discuss the Hickes Hanson Model of Disaggregated Macroeconomic demand and some mornings we discuss smelt fishing. There is a lost going on up in the woods of Maine. I met a client early one morning and we sat at a table. The regulars sit at the counter. My client said quietly, "You know, these are really interesting people."
They are indeed. I just saw "Money Monster". Like "the Big Short", it is not accurate in every detail, but it could all happen and may give Joe Sixpack some clue regarding the risk to his 401K or his pension fund.
CuriousGeorge 5 notices and wonders:
" When he contacts the government he will be told that its up to him to prove he withdrew his own money for legal purposes if he wants his money back. Great exercise of our given right of "innocent until proven guilty" right??
What law or decree has enabled this?"
No law, Curious; It's a practice. Don't like it? Go complain to Janet Yellin. They don't want the little people to have cash. They would rather have what you regard as "assets" in the form of plus and minus digits on a hard drive in a big black block in Utah.
I mean what is your source of data for your assertion "The mega rich are sitting on piles of assets and cash and not investing it in production" and your conclusion "because demand is soft and will be for a long time."
I already posted the graph of capital investment. Didn't you see it? Oh well, guess I'll post it again.
So investment is way down, moving in the opposite direction of the fortunes of the rich:
And the reason is obvious. The rich can't make money in the *real* economy after they've systematically destroyed it. Production follows demand. Demand depends upon consumer buying power. For 40 years the productivity gains have been going to the rich, and consumer wages have been flat. So wages can't support higher demand.
Note in the graph below that a steady x% per year increase in real wages would be an exponential curve. Real GDP/capita during this whole period was a relatively steady +1.9%/yr. Up to 1929 the worker pay increased at ~1.5%/yr, so just a little under GDP/capita. Even so, the production-consumption imbalance was enough to cause serious instability resulting in the crash and Great Depression. Wages took a hit, but nothing compared to the hit the rich experienced. Wages quickly recovered and began rising at an unprecedented rate starting in the early 30s. For the next 45 years real wage rose at a rate of ~3%/yr, well above GDP/capita, and the income and wealth share of the rich dropped steadily during this time. For the great majority of our population it was by far the most prosperous period in our history.
From ~1970 to 2000 a large part of the increase in demand was due to a rapidly increasing labor force participation rate.
The rest was easy credit and escalating debt:
Both of these are of course temporary "stimulus" and can only last until the factors max out. For 40 years we've been living in an unsustainable bubble economy. We are left with poor demand due to poor consumer wages and a high debt load, and no more bubbles to inflate.
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