# Uh oh......this looks bad!



## Magus

U.S. debt is losing its appeal in China - International Herald Tribune

We owe China too much?! WE OWE CHINA?!


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## Canadian

Yup. When they dump U.S. securities it will cause a world wide sell off of U.S. currency that will collapse the U.S. dollar and bust it down the Peso levels. That combined with the continued printing of trillions of dollars for bail outs will flatline the U.S. economy.


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## endurance

Mainland China 585.0 
Japan 573.2 
United Kingdom 338.4 
Caribbean banking centers 185.3 
Oil exporters 182.2 
Brazil 141.9 
Luxembourg 91.8 
Russia 69.7 
Hong Kong 60.9 
Norway 52.2 

Those are in billions of US Dollars and that's only the top ten foreign holders of US debt. If the debt holders refused to take dollars in repayment for the debt (as France did in 1941), we could use the 147.3 million troy ounces in Fort Knox, which, at today's closing price would almost pay off Brazil. Ooops, I think we might be in trouble...


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## Denny

Magus said:


> U.S. debt is losing its appeal in China - International Herald Tribune
> 
> We owe China too much?! WE OWE CHINA?!


Bro... China can single-handedly bring down the US, financially, if they were to pull all of their interest out of our economy.


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## dilligaf

endurance said:


> we could use the 147.3 million troy ounces in Fort Knox,


thats assuming the gold is still there. its my understanding a audit hasnt been allowed in over 50 years. many MANY people believe the gold has long since vanished and they are guarding a empty vault.


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## Canadian

They are constantly selling the gold off to their friends under market value in order to drag down the market value of gold. They feel that dragging down the value of gold will erode confidence in non paper money. In reality they are just pumping new gold into the already rabid gold market and encouraging trading of precious metals.


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## Magus

Denny said:


> Bro... China can single-handedly bring down the US, financially, if they were to pull all of their interest out of our economy.


And it looks like they may do just that!


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## Canadian

Like it or not China and India will be the new superpowers and it's all based upon population and the ability to produce goods.


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## endurance

I'm not a big believer that China would intentionally bring down the US economy, as they have as much to lose as we do. Those factories are going idle as we can't afford to spend. However, that doesn't mean that they won't lose confidence in the dollar as the safe-haven currency it has been for years. If people suddenly see the Euro, Pound Sterling, or Yen as the safest currency, then all bets are off. It's more an issue of confidence than maliciousness.

Re: Fort Knox, there was a public viewing to address concerns back in the 70s and the GAO did an audit in 1981. I'm not a big believer in government conspiracies because I've worked for the government most of my life. There's very few secrets that can be kept in the government that don't get leaked out eventually. You certainly couldn't keep something that big under wraps for that many years without a Washington Post cover story on it.

While most people are busy fretting about conspiracies, the reality of what we know is plenty bad enough. Nobody has to have evil intentions at this point, momentum alone is going to bring down this house of cards in due time.


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## Canadian

Recently China bought the rights to all the oil in Syria. It's not impossible that a nation like China hungry for oil could strike a deal with a nation like Iran. The Iranians could negotiate that in return for turning over all their oil rights to China the Chinese would trash their U.S. securities and destroy the U.S. economy. Peak oil is still here and isn't going away. The few nations with oil are not friendly to the U.S. and could do anything to bring the U.S. down.


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## The_Blob

I posted this in another forum & figured it applies here too



The_Blob said:


> The Wall Street Journal had an article on 'The paradox of thrift' this week.
> 
> For years it seems economists have been pleading for Americans to increase their savings to support the continued growth of the American economy. It is a simple, basic tenet that one should live within one's means (and hopefully retain assets against future developments). But NOW the popular thought is that an increased savings rate in a recession will aggravate and prolong said recession. From a macroeconomic viewpoint the good of the whole is served when consumers increase spending during a recession, but conversely microeconomics recognizes that in a recession the individual consumers will curtail their spending to preserve liquidity.
> 
> I can see the basis of the paradox but IMO relying upon the middle class to increase spending to turn the tide of a recession is a bit like trying to use an inflatable boat for a transatlantic voyage... I'm sure it can be done, but it seems fraught with unnecessary risk. I would think that maybe Americans will take a lesson from past generations and let this experience strengthen us as we learn some very hard lessons and embrace the benefits of frugality, the virtue of postponed gratification, and the adaptability afforded by increased liquidity.
> 
> It's my hope that people can come together during the coming crisis, but I lose more & more of that hope every day observing the 'normal' people going about their conspicuous consumption-driven day-to-day routines.
> 
> I didn't think I was supposed to be this sardonic at 24...


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## endurance

Canadian said:


> Recently China bought the rights to all the oil in Syria. It's not impossible that a nation like China hungry for oil could strike a deal with a nation like Iran. The Iranians could negotiate that in return for turning over all their oil rights to China the Chinese would trash their U.S. securities and destroy the U.S. economy. Peak oil is still here and isn't going away. The few nations with oil are not friendly to the U.S. and could do anything to bring the U.S. down.


While I'm a big believer in Peak Oil and the pressures it will place on global relationships, the China-Syria relationship is hardly worth mentioning. Syria is incredibly small potatoes, exporting less than 1/10th of all middle eastern oil. Iran has no problem selling their oil on the open market, so a one-on-one relationship with China serves no benefit to them. Besides, why would China give up a $300 billion per year trading partner in exchange for a single oil supplier that is either at or just past peak oil production?

The real concern for energy security should be what's in the headlines for the last two weeks; the stranglehold that Russia has on European natural gas supplies. This has already had an impact on Germany's foreign policy during the invasion of Georgia and will play a growing role as more European nations become even more dependent on Russian gas. This is the type of thing to be worried about.

Don't forget that it's Canada, not the Saudi's that are the current #1 supplier of US oil and Canada is far from reaching peak oil. So far, there's been little interest in finding other buyers for Canadian oil with your rich bretheren to the south buying up all that's available. It's an open market when it comes to oil. Any supplier can sell to the highest bidder because it's easy to put on a ship and send around the world. Natural gas is a different story. It's not as easy to ship and it generally takes pipelines that take years to build to transport from nation to nation. Even the UK hit peak natural gas production already, so Europe is screwed. Their one hope for non-Russian controlled Caspian Sea natural gas was dashed when Russia flexed its muscles and ran roughshod over the Georgian army. Construction on the southern pipeline, outside of Russia's control, has all but stopped as investors nerves were frayed by the events of last summer. Russia succeeded in both derailing the pipeline and Georgia's membership in NATO. By doing that, they've assured their role on Europe's center stage for the next century.


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## Canadian

Endurance - I think you made some good points. I guess what I was trying to get across is that the nations that have oil for export (excluding my own) are unfriendly towards the U.S. and the nations through which the oil passes (or which are competing for a market share) are also hostile. It's not a good situation for an oil hungry nation like the U.S.


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## endurance

Agreed. I saw the best thing that's ever happened in the US in May, June and July: $3.75/gallon gas. Tens of millions of Americans found another way to get to work, bought more fuel efficient cars (the waiting list on Mini Coopers was out to six months!), and actually started conserving the stuff like it might be in limited supply. In June alone, US consumption of gasoline dropped by 6%! Unfortunately gas is cheap again, but there does seem to be some lasting effect on the choices people are making when making new car purchases. Probably the best thing for the environment the world could ever ask for is a global depression. People learning to live without, conserve, and change the places they live and the lifestyles they live is the only way we can avert disaster.

I was a cop for several years and the one thing I walked away with was the fact that people don't learn from joy, they learn from pain. For some, it's the DUI that makes them ride the bus that turns their lives around. For others, it's the domestic assault that put them in the hospital and made them re-examine their lives. For Americans, life has been far too easy to have any desire to change. Only rising energy and food costs with reduced job security will actually motivate people to change their wasteful behavior.

Hopefully we're entering an era of painful change that won't lead to the end of the world. Hopefully, the US can make dramatic changes in the face of inevitably tough economic times ahead. We're still the third largest oil producer in the world, unfortunately, we're the number one consumer by over 7,000,000 barrels per day. Things are going to have to get a lot tougher to change that, but I don't see a choice. We've already past peak oil and China is the number three importer (number two consumer) in the world and rising like a bullet. You're right, of the top 15 oil exporting nations, only two or three are anything I'd call real friends to the US. On the plus side, all but a handful of those countries are anything but greedy and capitalistic, always willing to deliver to the highest bidder. 

In the end, we're left with a sad hope: the hope that the world suffers so badly economically in the next decade that it will shrink our thirst for oil to levels that are sustainable for long enough to put alternatives in place. No matter what, it's going to be painful. Since I was born, the global population has doubled, thanks in large part due to the use of fossil fuels in the "green revolution" of the 60's and 70's. While the world's ability to produce food has grown exponentially, the supply of the liquid that allows that growth has been proportionately used up. As the price of fuel rises, so too does the price of food. Heaven help those in third world countries that already struggle to put food on the table. As for the hungry populations of China and India, only time will tell what lengths these countries will go to in the years to come to feed their populations. Factor in another Mt. Pinatubo, or worse yet, a Mt. Tambora-sized eruption, and the lives of billions could lie in the balance.


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## endurance

Well, it looks like the economic doom that is "best for the environment" that I mentioned above isn't that far away. I will warn you, this article is a rabbit hole. If you're prone to depression or insomnia, you're probably better off skipping this one. Clicky on the rabbit hole


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## The_Blob

if that article is correct, endurance, it would seem that it actually solves the "paradox of thrift" I alluded to in my previous post & is a cause for me (at least) to be happy that I only 'live within my means'... maybe I shall read it again to be sure I didn't juxtapose some of the points


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## endurance

Yes, I agree. Inflation may not hit until the recovery, which could be five years off. The tricky part is making sure you can hold onto your job through the next few years. Right now the recession seems to be very selective, but as it deepens into a depression in 2009, more and more segments of the economy will be affected.


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## mongoose

"during the coming crisis"

What coming crisis are you referring to?


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## Denny

mongoose said:


> "during the coming crisis"
> 
> What coming crisis are you referring to?


Where the DOW hits 5000 and the S&P gets down to 500. You know, after the government pumps all this bail-out and stimulus into the ecomonmy with little to no results.


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## The_Blob

I was a toddler but I remember my Dad raving about how amazing it was that the DOW was at 2000, that was in 1987


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## MudDuck

Sorry I'm not one of those people who think 5.00 gas and 5.00 loaf of bread is good because it punishes us "bad Americans" for being greedy and glutinous and forces us to be frugal and live by someone else's subdued guilt standards. Thats crap...The oil situation is because of the speculator trading and the trading company's owning their own oil tank farms pushing their own profit agenda. Only reason oil has dropped is because the stock market fell and they are now running for cover. The curtain is being pulled away reveling the "wizard" as big greedy trading company's who are manipulating the market. I believe in peak oil don't get me wrong but the tree huggers can go ride a bike and live in a cave because they feel guilty but don't leave your guilt at my door expecting me to trip over it.


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## endurance

The price of oil dropped for a number of reasons. Yes, some was speculation, but some was also refinery capacity issues, some was supply efficiency issues, and some was strong demand through 2007 and the early part of 2008. A very weak dollar was also a very significant reason (in 6/07 it was $2.06 to the UK Pound, but started to strengthen over the summer of 2008 and by 9/08 it was $1.77 to the Pound. Currently it's about $1.51, last I checked). Oil is traded around the world in US Dollars, so we're currently benefiting from a lack of velocity in the money supply (M1), which brings up the value of the dollar around the world. A stronger dollar means oil is proportionately cheaper.

Another reason oil prices are currently so low is because demand is down from 20.68mbpd in the US in 2007 to 19.51mbpd in 2008. That's a 5.6% drop in consumption because of high prices early in the year and a slowing economy in the later part of the year. Much of the world showed a similar drop in demand over the same period. OPEC continues to restrict supply and will until they've succeeded in getting oil back up to $75 per barrel, if that's within their power. If they succeed, they essentially guarantee the recession/depression will be even deeper and longer that it would be with cheap energy prices.

The fact is this depression is buying us time before oil prices turn up the heat on the competition for resources and food prices. If consumption can be reduced by another 3-5% over the next 2-5 years and grow more slowly than 2000-2007 after that, then we may avert the worst possible peak oil scenarios. 

Mudduck, if you see a benefit to using up all the oil in the world as fast as possible without alternatives in place and I'm missing it, please share. My previous post was attempting to explain that while the high price of oil and current recession may hurt now, it could in fact avert far worse disasters down the road if we proceed wisely. Furthermore, there's scientific studies that demonstrates that it is easier to endure suffering when the individual knows there is a benefit down the road. That's what motivates athletes to train so hard and that was part of my intent with this and my previous post.


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## Canadian

Gas prices have gone up around here. They just tuned off the taps. Reduced supply = higher prices.


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## endurance

Canadian said:


> Gas prices have gone up around here. They just tuned off the taps. Reduced supply = higher prices.


They're up around here and nationally, too. I play the market a little on the side with regard to gas prices and so I watch supply very closely. This week doesn't make any sense to me. What's odd is that last week the supply of unleaded was the highest it has been since April 2008. Crude is down to $37/barrel and actually hit a low under $35 this week, where it had been $45-50 two weeks ago. So it's not the price of input and it's not a finished product supply issue, at least not from what I can see. Here's the best source for supply information in the states. Look at the days of supply for unleaded and crude. While it appears they cut refinery production the week of 1/9 for unleaded, it wasn't a dramatic cut. I'll be interested in seeing next week's report of this week's numbers. Clearly I'm missing something or the price wouldn't continue to rise.


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## The_Blob

doesn't the current price affect the finished product as well, wasn't there a slight increase in the cost/barrel about a month ago? Maybe with this drop, the price will go down in a couple weeks... 

seems that prices fall gradually & rise meteorically


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## Magus

Did anybody notice that 25 cents of each dollar paid in gas is taxes?


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## Canadian

In Canada it's even more.


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## endurance

About $.25 is federal tax. In most states there's additional $.10-30/gallon tax. The fed is part of the highway trustfund designed to pay for highway projects, but it's running out of money. There's widespread support for raising the gas tax since it hasn't been adjusted since the 1980s. Given the current backlog of infrastructure projects, I'd actually support it. Those who drive heavier vehicles more miles and therefore cause the most wear and tear would pay the most.

Europe's gas tax is self-supporting and pays for all highway projects and road maintenance. That's why gas is $6-8/gallon over there right now.


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## NaeKid

Canadian said:


> In Canada it's even more.


I saw a little blurb about the taxes on gas. The cost to make the gas and the taxes on the gas is approx. equal. The rest of the price of the gas in Canada is to cover transportation and overhead. BTW, I found out that the City of Calgary taxes gas as well (on top of the provincial and federal taxes). If I go to a small-town away from Calgary, the price is lower because of the lack of City-of-Calgary tax ...


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## The_Blob

NaeKid said:


> I found out that the City of Calgary taxes gas as well (on top of the provincial and federal taxes). If I go to a small-town away from Calgary, the price is lower because of the lack of City-of-Calgary tax ...


sounds like yet another reason to live in "the stix"


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## NaeKid

The_Blob said:


> sounds like yet another reason to live in "the stix"


No kidding. I think that the new place has come up on the radar. 72 acre for $300k. Comes with a creek and a shack on the land that can be used for a shop / office / house. Pictures look alright - will try to see it this weekend...

I could get "farm status" and then I wouldn't have to pay taxes on gas ...


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## TechAdmin

Really? 72 acres for 300k in Canada?? I thought land was cheap as dirt up there.


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## Canadian

Land is way cheaper in most of the U.S. since only the southern portion of our land is good for anything that needs to be grown.


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## endurance

Hmmm, makes that 35 acres for $72k look that much better... and it's a whole lot warmer, too. I've seen stuff on the plains in Colorado (dry land farms) going for $700/acre for 80-160 acre plots. $1000/acre is pretty standard even for small stuff down to 15-35 acres.


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