Perspectives on the global economic meltdown (Jan 26 2010)

[Hari Seldon]

How sustainable are these values?

Oh, they're likely not.

Let's hope when they come crashing down to earth, the gubmint won't swindle taxpayers and savers with a bailout for these speculators or their lenders.

[ShivaS]

Those values are perfectly sustainable easily and appreciable possibly.

1) The Black money in India far far exceeds the actual money declared and circulating. ( From one IAS couples home 300 Crores czash was Mined and shown in TV Hard cash).

2) The black money and white money regurgitate like in Viswarupam of Narayanan as described by Arjuna, people going into the mouth of Vishnu and people being (re)born again.

3) The land is sparse and people are more (ofcourse the illegal mining is also contributing to diging holes in the land)

4) Govt owns vast tracts and therefore controls and regulates artificial prices (only select few are allowed through subsidies for IT parks Seepez zones, cine actors political cham chas etc.)

5) The return on (ROI) land will be more than return on built up area.That is assuming you can protect your plot/lot from selling one more person even before the ink dries on your stamp paper) If you succeed in that then you can make a killing or get killed protecting your assets. Watch how mamta didi sent Tata packing even with out saying buy buy..

[SwamyG]

50L is reasonable in my opinion, definitely in the upper middle class category. Rental and future customers would be in this category as well. With that I opinion I had bought a flat in the range 50-60L in Hyderabad (1900sq ft) If I have to resell, my potential customers would be upper middle class. BTW, I liked a flat that was under construction - it was going for 2C (2 crores), I really liked it. Man it was great. I enjoyed touring the model flat.

My parents bought a flat for 9L in a suburb of Madras few years ago. I did not have the heart to tell my parents that it looks bad, but did tell them not to invest in flats. But they were smitten, they wanted to own a home for personal/family reasons as well. So I loaned them some money..... long story short, now that flat, which I termed bad, is going for about 33L. That is more than 3 times what they paid. Middle class families would be in this range. One of my relatives, who is a mechanical engineer, and does not rake the 20L a year, bought a flat in the range of 30-35L in Madras suburb.

[abhischekcc]

Unfortunately, these prices are very sustainable. India is in a real estate development mode. Don't hold your breath waiting for prices to come down. I have seen that housing projects start getting populated before the whole thing has been constructed. I have been waiting for a price collapse for several years myself

There still are a lot of first time buyers in the market. Many middle class people have second and third and even more houses - for rent, speculation, black money, etc etc. There is wayyy too much support in the market for RE prices. Price rise has softened, but not prices. There are many single young people who live with friends, and when they start living on their own (singly or after marriage), it creates its own dynamic. There are far too many such people.

If you want to live in the city, then these prices cannot be avoided. If you want a quiet place, it is better to look for something a little farther away for the same price.

[vera_k]

At this point, you can live cost-free by renting in India and using income from an investment property in an American city to cover the Indian rent. This seems to indicate something is out of whack when it comes to Indian real estate.

But given the demand generate due to demographics, Indian prices are sustainable as long as regulation stays at non-existent levels. Introduction of title, disclosure and appraisal norms will serve to impose some discipline and perhaps lead to better price discovery.

In the meantime, Habitat for Humanity is planning on building homes for $1,000 which can be taken as the lower bound cost for basic homes.

[paramu]

I had earlier said that there will be inflation in Germany and deflation in Greece.
If only Greece has domestic production ramped up for doemstic consumption ( food & Basic needs just the Toga & Orektiko) do it so in barter , till such time that they decouple from Euro and devalue their currency new currency or cupons(GD Greek Dinar{o} ) vis a vis Euro.
They have a chance of rising like a phoenix.
They have to go to barter system internally till services and product be paid in local denomination.

What will happen if Greece introduces a local currency without pulling out from Euro? Say, Government says that all local transaction will happen in local currency and Euro can be purchased from their central bank when needed. Of course, the rich guys will jump out of local currency and go to Euro, but their welath must be going out of Greece anyhow. ECB may say that this is against their treaty, but Greece should say that they will continue to accept and do external trade in Euro. This local currency is only to create an internal credit system to bootstrap local economy.

[yogi]

What will happen if Greece introduces a local currency without pulling out from Euro? Say, Government says that all local transaction will happen in local currency and Euro can be purchased from their central bank when needed. Of course, the rich guys will jump out of local currency and go to Euro, but their welath must be going out of Greece anyhow. ECB may say that this is against their treaty, but Greece should say that they will continue to accept and do external trade in Euro. This local currency is only to create an internal credit system to bootstrap local economy.

Why would citizens hold their wealth in an inflationary currency? Greece government will get the license to print unlimited amount of such currency, thus causing inflation in that currency. But Euro will be much more stable. So why would a farmer selling wheat and chicken, get their payment in this new currency? Except the government, no one else would want this currency.

Its similar to having Gold coins and fiat notes in simultaneous circulation (with a government defined exchange rate). But over time (as history has shown), fiat will far exceed the government fixed price for the gold coin (because government printing presses are working real hard), causing everyone to rush in to hoarding the real gold coins, instead of fiat.

[paramu]

I don't think average greek citizen will be thinking about wealth; he/she must be worried about their own survival. What this fiat currency would do is to provide a form of credit to local population to do business (instead of barter).

This will also make an alternative system ready inside Greece to switch quickly, if they want to get out of Euro at any time in future.

If people think that greek govt. may inflate this currency without any limit, I would advice greek citizens to start protests to overthrow the govt.

[Hari Seldon]

^^^Aha... fascinating idea paramu garu. Its for gems like these that this dhaga exists only.

Let's not forget that during the great depression, you had hunger coexisting with farmers throwing away milk in Amrika of all places. The reason - there wasn't enough gold backed currency to lubricate economic transactions only. The hungry could be willing to sell their time, labor etc real cheap if required but that still required a medium of payment, of currency exchange which wasn't there thx to the acute shortage of gold backed greenback.

I think this idea has hajaar merit. Would be good to have provincial gubmints in greece start this thingie rather than Athens, on a trial basis.

After all, I hear 1 Malaysian state has already announced plans to move to a parallel gold, silver and other metals coins system - raising a quiet firestorm in gubmints and central banks worldwide.

[arnab]

^^^
After all, I hear 1 Malaysian state has already announced plans to move to a parallel gold, silver and other metals coins system - raising a quiet firestorm in gubmints and central banks worldwide.

Are you talking about their plans for the 'sharia' currency in the region of Kelantan ?

http://blogs.ft.com/beyond-brics/2010/0 ... ency-gold/

[negi]

ShivaS boss is right on the money. Real estate prices are only going up naarth in desh.

[ShivaS]

In Hyderabad Airport there is cafe/Food court called Flavors of India (Flavors of India has Chinese too, If they want to claim Arunachal who cares? when we claim the whole of China !)

There you pay Rs 250 and get a card with which you can buy at any kiosk any thing, they in turn debit the card. And on return the difference is cashed out at kiosk where you exchanged Rs for card..

Greece should do this for internal consumption as first step towards weaning away from Euro.
SOme thing like SDR for nations. for greek people.

This kind of thing also done during Wars WWII, Emergency (1962 Gold Bonds you pledge gold and govt gets Gold loans to buy Arms).

Sugar permit, ration cupons to soldiers families etc.

At the very lowest granularity all currency is just I owe you pledge (by a fiat) and traded.

{I promise to pay the bearer.... yada yada... by keeping money in your pocket you are reduced to a bearer}

[Neshant]

There is no point to a Greek local currency. Its exchange rate would be quickly discovered and nobody would want to hold it.

If they intend to repay all their debts with printed up drachmas, it is technically a default on the debt. If default is the intent, then just go ahead and default by paying pennies on the euro. No need for local currency resurrection, printing and other fiat nonsense which fools nobody.

The only point to re-introducing the drachma is if they get kicked out of the euro. Their best bet is staying in the euro and doing what all bailout & handout hounds are trying the world over - passing on their burdens to suckers like Germany, France..etc. They in turn crank up the euro printing and spread the losses across euro members and foreign suckers like Japan, China, Russia, India..etc. holding euros.

French president was recently on a bull&hitting trip to Japan encouraging them to continue holding euros because "now the euro is at the right level". As if his host can't see that they are victims of yet another printing scam!

The world over keynesian economics is being as exposed as little more than a money printing racket.

[Neshant]

I posted this clip earlier of a small scale effort in Indonesia to conduct tranactions in gold & silver. The gold dinar and silver dirham coins are thin (few grams of gold/silver each) and thus can pay for a wide variety of items. If there is any small change to be handed over by the shop keeper for a purchase, its done in fiat.

http://www.youtube.com/watch?v=Wkb_ykilflU

[ShivaS]

The point is not what an external exchange rate is.
The point is to delink prices and wages from external economies.
The point of Euro was to (like common wealth) every body dips into the same market with same tax / tariff structures with out any control on overdraft and expenses.

This often happens in India, the state govt can run large deficits and the center bails them out (rs 1 kg for rice dal, Power free kind of looting schemes) and then RBI raise stink.

Extrpolate this model EU zone Germany behaving Like RBI.

In India the stae Govts can Tax in their Zamin(dari), but here too Greek is constrained not to go beyond certain limis... only option left is to cut expenses and thats layoff, and trimming govtto minimum.

heck in 1997 GOI under Indira gandhi and Bihar famine had to devalue Rs by 23% if I recall correctly, The food prices shot up and PDS was started in right earnest and we went into large scale deficit financing, Luckily we had 8 years before Oil shock to hit us (1974 Yomkppur war and OPEC)and a war in between 1971 (Bdesh) {remember 5 paisa additional stamp for Bangla desh relief which continued for ever and regularized.

First Order of action in Greece is stop and prevent turmoil on Food and productivity.
Delink from Euro, and get back the power to print Fiat money. Inflation (not Hyper) kind is anyday better than deflation...

Delation is like distress (yard) sale vultures will hover rightaway.

I f I were Vijay M of King Fisher, buy landing rights in Athens And Barcelono air ports. Start tourist packages at discount prices and share a small part of profits with Greece govt and Spain. Sell them the idea that your Iberia (which is merged with British Airlines which is in itself in dole drums!) and Olympic is gone , With middle class doing great the India markets are ripe for tourism (even if flesh kind like the Delhi CW games escorts from Spain, Turkey Khazak ).

I mentioned this on King fisher airlines comment card lets see what Vijay M does.

[Neshant]

The point is not what an external exchange rate is.
The point is to delink prices and wages from external economies.

I don't understand how that would be done. Having a closed economy (like a communist economy) where the state sets prices sounds like a disaster. Furthermore it does not answer the question of how it helps them repay their foreign debts all denominated in euros.

Delink from Euro, and get back the power to print Fiat money. Inflation (not Hyper) kind is anyday better than deflation...

Sorry I totally disagree. Running a fiat printing scam is a robbery scheme that will soon reach its mathematical limits all around the world. The only thing printing does is rob those who have been responsible/productive (assuming they did not earn their money as financing & banking crooks) and transfer their hard earned money to debt holders of those who have not. The proverbial robbing peter to pay paul. That's no way to run an economy. It does not 'help' the economy any more than a home invasion & robbery of your house helps your neighbourhood.

Wages, pensions, handouts..etc and general standard of living will have to fall in Greece as the govt tightens its belt and sobers up. If it cannot pay its debts, it should work out a debt consolidation/restructuring deal and do a fair debt-for-equity swap with some state assets. The rest will have to be defaulted on. Countries will be wary of lending big bucks at low interest rates to Greece after that until it regains the trust of lenders by living within its means.

[Dileep]

About 'imaginary estate' here in SRK, DMA in particular:

You can buy a 2BHK unit at launch for र 2400 per sqft. Add र 2 to 3L for car parking (yes, it comes extra) etc. So, a 1000 sqft unit could be bought at 27-30L. The same unit would rent for र 10K. If you put the same money in a bank, you will get र 16K per month.

But, the problem is inflation. Here, I see that the long term interest rate is ALWAYS equal or less than the inflation rate, while incomes and prices tracks with inflation. For a massa person, it is tough to perceive. I know, because I myself had lost the perspective in just six short years.

The real estate prices here is determined by the affordability of the middle class. Yes, there is lot of 'investment', 'money in containers' etc, but the builder still need to sell it to the aam middle class. You buy a home that you can pay for in 20 years. Not more. So, the prices have a bearing on the average income of a middle class person.

So, in my considered opinion, THE BEST inflation tracked investment is a dwelling unit, or plot. Any time, it will get you the value appropriate to your current middle class state.

[ShivaS]

"Morality and making Money are not miscible" Spinster.

The issue is to get Greek on their Marathon feet to run.

"Inflation is abhored by Wealty & Aristocrats, Deflation destroys the productivity of common man."

The greek issue is to protect its people from descending into chaos that too dictated by another non greek entity.

Communism as practised is disaster so is captalism in non regulated (minimalist intervention to Ron Paulism) is equally disaster.

tell me How Somalia, Afghan, N. Korean govt are working. Even Zimbabwae to an extent is good case study.

Even pillaging Savages always looked for portable value , that includes Women and WIne. Not just gold or USD or Euro.

These curriences are just a paper with I OU with portability nothing more nothing less.

Swaraj mean self sustainance at the grass roots level. Greeks need Gandhiji not Aristotle now.

[shyam]

The only thing printing does is rob those who have been responsible/productive (assuming they did not earn their money as financing & banking crooks) and transfer their hard earned money to debt holders of those who have not.

I think you always assume that all central banks and commercial banks are private. Why can't Greece have a central bank like RBI that is governement owned? There can be corruption and political favoritism, but need not be crooked banking things we see in the west. One advantage this has is that it can provide loans to other citizens without begging for the mercy of ECB and bond holders. Current deflation will add a huge credit crisis and may even stall entire economic activity. It may take few generations for them to come back if they follow the prescription provided by Ron Paul. Ron Paul prescription must be followed only when you have full infrastructure of a productive economy.

BTW, I agree with you that Greek living standard has to come down and they have to work hard and earn the lifestyle they once enjoyed.

[shyam]

http://www.youtube.com/watch?v=Wkb_ykilflU

Just curious, who mints these dinars and dirhams and what did they do to the paper money they got when they sold the coins to the public?

How can an average abdul trust the quality of coins he exchanges?

[Carl_T]

^^
What is your edu background piradher?

I am a BA onlee.

[Carl_T]

This is a good article.

Babysitting the Economy
http://www.slate.com/id/1937

People keep talking about either lowering taxes or increasing spending as a means of stimulus....but why not simply inflate the money supply? While interest rates are very low, the Fed can expand the balance sheet and buy in pretty sizable amount of corporate debt to increase the money supply without needing a stimulus....

[Manishw]

^ If the Fed doesn't do anything soon the global economy and capital markets are going into a tailspin.Deflation has already taken a hold again in the developed world.

[paramu]

There is deflation in Greece and greek government must do everything to stop it if they represent the people.

Greek crisis refuses to go away

The European Commission has approved the next €9bn (£7.4bn) tranche of loans for Greece the underlying economy continues to deteriorate as Greek banks suffer a record loss of deposits and output contracts at a quickening pace.

[paramu]

Guess who protects all the chors:
Bankrupt Europeans are flocking to London

The City of London is getting itself a bad name. A “bankruptcy brothel” is what some now call it – a haven for European companies and their owners fleeing creditors, into the welcoming arms of its courts.

In recent weeks, these fears have been further reinforced with companies from Greece and the Netherlands moving their “centres of main interest” to London so that they fall under English law in apparent first steps towards their own debt restructurings.

While this trend of jurisdiction shopping for insolvency is not new, in the wake of the credit crisis, the losses for debt investors when companies shift to England can be searingly painful.

[Hari Seldon]

People keep talking about either lowering taxes or increasing spending as a means of stimulus....but why not simply inflate the money supply?

Which is precisely what the Fed has (stealthily) been trying to do for a long time now. No? And it doesn't seem to have achieved the desired result, of course.

While interest rates are very low, the Fed can expand the balance sheet and buy in pretty sizable amount of corporate debt to increase the money supply without needing a stimulus....

The Fed has expanded its balance sheet by a few trillion dollahs - unprecedented really and is yet to dent the downturn significantly, IMHO.

Oh, I agree with the crying need to get money into the hands of the people. BUt that money should be money as money not money as debt else even at 0.25% rates, people will ocntinue to pay down existing debt and extinguish credit creation in the system

However, when it comes to money as money as opposed to money-as-debt, the Fed can't do squat. It is upto congress alone to make this possible.

I'd rather COTUS 'monetize' the kind of expansion seen in the Fed's balance sheet and directly mail cheques - free money with zero repayment obligations - to households and then see the stimulus kickstart the khanomy's lowest rungs and trickle upwards. Yeah, but what are the odds cotus will do that now or a GOP dominated one will do so in the future??

[Neshant]

The only thing printing does is rob those who have been responsible/productive (assuming they did not earn their money as financing & banking crooks) and transfer their hard earned money to debt holders of those who have not.

Why can't Greece have a central bank like RBI that is governement owned? There can be corruption and political favoritism, but need not be crooked banking things we see in the west. One advantage this has is that it can provide loans to other citizens without begging for the mercy of ECB and bond holders.

Its irrelavant whether central banks are private, public or otherwise. The whole concept of some guy sitting at the top pretending to know what's best for the economy is ridiculous. The best thing about the crash is that it exposes this profession as useless at best as parasitic at worst.

As for Greece, the fact that they cannot print their way to glory is a good thing not a bad thing. It prevents them from engaging in any more foolishness and puts them on the road to the real recovery - which is living within their means. But first they got to take the medicine and deal with the interm consequences. All other printing & scamming schemes that are being labelled recovery these days will soon be wrecking what's left of the productive economy. It can be filtered down to 2 rackets : either run up debt or rob A to pay B.

Now onto the solution. The solution is simple. Spend less & pay down the debt, seek debt restructuring with creditors (basically a partial default) and live within your means thereafter.

Its simple. Anyone can do it. But they won't.

[Carl_T]

Oh, I agree with the crying need to get money into the hands of the people. BUt that money should be money as money not money as debt else even at 0.25% rates, people will ocntinue to pay down existing debt and extinguish credit creation in the system

However, when it comes to money as money as opposed to money-as-debt, the Fed can't do squat. It is upto congress alone to make this possible.

I'd rather COTUS 'monetize' the kind of expansion seen in the Fed's balance sheet and directly mail cheques - free money with zero repayment obligations - to households and then see the stimulus kickstart the khanomy's lowest rungs and trickle upwards. Yeah, but what are the odds cotus will do that now or a GOP dominated one will do so in the future??

I don't think money should be injected into the economy via the "helicopter" method. However, if the Fed prints money and uses it to buy high quality corporate debt in large amounts, I think it should instigate borrowing and lending in the way a stimulus would and increase the velocity of money, but I suppose at no cost to the treasury. JMT

[shyam]

Celente on roll.
And Now We're Headed For The GREATEST Depression, Says Gerald Celente
America Won the Cold War But Now Is Turning Into the USSR, Gerald Celente Says

[ShivaS]

The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives.

I had mentioned this earlier....
The anti dote for India in case khan land goes introvert and blocks markets and drops consumtion was also mentioned as
build up internal consumption, make more Indians have disposable income to consume more....


read newpapers lately
There is a Tire shortage and auto companies are scrambling for imports and PRC has stepped up this is an example of diversification of markets should West go contraction.

Lot of manufacturers supplying auto components are unable to meet Indian car purchase appetite as they were caught napping PRC is pumping up exports. Bharat Forge is doubling its capacity...

Now just imagine if we could locally produce javlin like anti tank missile instead of pumping money into khan land...

OT but I still dont understand the attiude of Army thinking it will have massive tank battles in the plains of Punjab and Rajasthan like battle of the Bulge mode.


The first step is restrict unnecessary imports, keep the money dry (when khan opens up vaults of its MIC buy the best as required.) Increase local consuption is the mantra...

*************
one sample comment (read all) from the above posted articles

agree with you Mr. Gerald Celente that we are steadfastly headed into the Greatest Depression ever ! I have observed the following Trends. Our Fiat currency has been devalued into oblivion and by the way we are not on the Gold Standard. The US Constitution mandates Gold as legal tender. Our current denominational bills are all Federal Reserve NOTES. NOTES are IOU's that are not backed by GOLD certificates so therefore you cannot go to any bank and cash in your bills and demand GOLD. Our money is useless and is not worth the paper it is printed on. We are currently in a deflationary period account of economic contraction account of consumers are not buying any goods and manufacturing has excess inventories. As a result of this we have massive layoffs and massive unemployment and to top that off Banks are not loaning back the money they hoarded from the bailouts back to small businesses to create new jobs. There has been no trickle down effect of money getting back in the pockets of consumers on Main Street. The Large Banks and Wall Street in this charade are deliberately driving down the prices and earnings of small companies to eliminate competition through bankruptcies and merger acquisitions monopolizing Cartels. Credit contraction has been deliberate by large Banks in the refusal to make loans available to small businesses. The second wave of derivative ARM product mortgages are just about to reset starting the process of a new wave of home mortgage foreclosures. Home prices continue to drop along with equities in homes. Commercial real estate foreclosures continue to rise. The home loan volunteer mortgage modification program is a charade that is not working. Wall Street just took a big hit and the dreaded W is upon us. The Bond market is in a Bubble and it will pop ! A third World country will default on its credit that will start a domino effect that will erupt into a Worldwide depression. Inflation will be rampant and shortages will exist for goods account of demand now exceeds the capacity to manufacture goods thanks to the massive layoffs and downsizing. Now than we have to look at Iran and wonder about the what if with Israel and also look at North Korea and wonder about the what if with South Korea. As we speak the Central Banks along with Wall Street are doing a little trading after the closing trading hours on the New York Stock Exchange to manipulate the price of Gold and try to hold it down ! Now than since you can see the whole picture it is very easy and clear to see all of the Trends.

[svinayak]

http://www.youtube.com/watch?v=QG4jhlPLVVs

The Broken Window Fallacy
This short video explains one of the most persistent economic fallacies of our day.

[chola]

The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives.

This is way overstated. The American middle class is massive and is immensely wealth compared to the "middle class" in 90% of the rest of the world. Middle class worldwide is defined as people being able to spend $2 a day. In the US, the lower middle class has over $100 a day ($40K a year) to spend.

[ShivaS]

One mustgo into interirors of Minnesota, Michigan, Wisconsin, Iowa, MS Kansas to understand the decline in the middle class and its erosion of wealth.

It is a myth to think the US middle class is massive and intact. The itvity guys who are cities or in universities have no clue how the rage and recentment is brewing in US.

The cost of Gas, Milk, energy etc are driving more whites into poverty than anytime.

Try a trip if you can dare as a non white (i assume) to understand the low wage earners lives in USA

[milindc]

The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives.

This is way overstated. The American middle class is massive and is immensely wealth compared to the "middle class" in 90% of the rest of the world. Middle class worldwide is defined as people being able to spend $2 a day. In the US, the lower middle class has over $100 a day ($40K a year) to spend.

I assume that is poverty definition worldwide. Where is that defined ?

[chola]

I assume that is poverty definition worldwide. Where is that defined ?

As defined by Asian Development Bank, among others:

http://www.thehindu.com/business/Econom ... 582523.ece

In a special chapter of ‘Key indicators for Asia and the Pacific 2010' report — ADB's flagship annual statistical publication — the multilateral lending agency has said that the ranks of India's middle class, defined as those consuming between $2 and $20 a day (based on survey data in 2005 purchasing power parity), grew by around 205 million between 1990 and 2008

[chola]

One mustgo into interirors of Minnesota, Michigan, Wisconsin, Iowa, MS Kansas to understand the decline in the middle class and its erosion of wealth.

It is a myth to think the US middle class is massive and intact. The itvity guys who are cities or in universities have no clue how the rage and recentment is brewing in US.

The cost of Gas, Milk, energy etc are driving more whites into poverty than anytime.

Try a trip if you can dare as a non white (i assume) to understand the low wage earners lives in USA

There is no doubt that there is anger in the US. And yes, it is getting uncomfortable for non-whites especially in light of pakis and other scum tarring the image of desis at the same time we are having a recession. There is no question of that.

But a decline in the American middle class is relative. The US middle is still immensely wealthy and the fact of the matter is the people suffering most in this recession are minorities -- mainly blacks and hispanics -- who have recently made it into the middle class and are now knocked out back out of it. Those were people engaged mainly in manufacturing and small business whose hold in the middle class was tenuous.

Now if the white middle class were truly being affected to a great extent then Wipro, Infosys and Tata will come to a grinding halt because the white middle class is mostly service based and it will fight to keep its jobs. The fact that there still lots of positions being outsourced means that the American middle class is still creating jobs.

That is not to say that whites in the great American middle class haven't lost some of its wealth. But it also must be noted that a lot of them made money when the stock market rebounded 40%.

[svinayak]

The crux of the problem, Celente argues, is that the middle class has been wiped out. America used to be a land of opportunity for all, where hard-working people could build their own small businesses in their own communities and live prosperous and fulfilling lives.

This is way overstated. The American middle class is massive and is immensely wealth compared to the "middle class" in 90% of the rest of the world. Middle class worldwide is defined as people being able to spend $2 a day. In the US, the lower middle class has over $100 a day ($40K a year) to spend.

Welcome back man. It has been 5 years since you posted.
Your perspective on China is needed in BRF.

[Hari Seldon]

I somewhat agree with sri chola's assertion on technical grounds.
It's not so much 'the US middle class is wiped out', it is more of 'the US middle class' future is wiped out' only.
Only.
The current living standards of the majority in the emerged world is in peril due to deflationary forces, demographic deficits, debt burdens and defacto (defecato?) insolvency etc is reality asserting itself. Only.

Sure, let's hope some new technological miracle lifts the US middle class out of this morass. And also provides a beacon of light and hope for us middle-class hangers on in the emerging market hell-holes. Only.

[Neshant]

The priveledge of printing the world's reserve currency I'm sure adds a great deal of $ to the middle class in America. Also the ability to run up their debts without being questioned and having bogus rating agencies around helps as well. Plus the looting of Iraq and Afrcan countries via resource grabbing and IMF trickery.

But this priveledge could be winding down within the next 3 to 5 years.

Strip out most of the above, what % of the income earned by the middle class is due to real productive output?

What's clear is that the profits of globalization have mostly gone to the upper class and largely wrecked the lower and now the middle class. Hence the need to have some popular showman like Obama around to placate the blacks & hispanic minorities into thinking they have someone with their interests in mind at the helm when really the guy is just a clueless stooge taking instructions from wall street & federal reserve crooks that surround him. So far he's done a great job for them by standing by while they offload their losses onto taxpayers.

My prediction is that the 2012 election will see Obama + Hillary Clinton as running mates to fool the other yet untapped segment of voters - i.e. women. The need of the hour is to keep voters in the dark about the unfolding fall in their standard of living while continuing to pass on losses to suckers.

[shyam]

Welcome back Chola.

But a decline in the American middle class is relative. The US middle is still immensely wealthy and the fact of the matter is the people suffering most in this recession are minorities -- mainly blacks and hispanics -- who have recently made it into the middle class and are now knocked out back out of it. Those were people engaged mainly in manufacturing and small business whose hold in the middle class was tenuous.

Check out the interview of one George Hemminger starting from 12:30. According to him the most disadvantaged people are the middle class and not the lower class.

[KR65] Keiser Report – Markets! Finance! Contango!