Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

Gold and diamonds, oil and iron are dug up and added to the wealth. Crops are grown, timber and other renewables harvested. So while all the wealth in the world is finite or limited we don't seem be be reaching the limits yet of how much wealth can be created. The limit we are running into is how many Greeedybeasts it will actually support.

The fact remains that anyone who has vast quantities of cheap energy at their disposal has wealth, because energy does WORK, and work is LABOR.

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Oil is simply an abused and overly speculated form of energy, but if you own a lot of oil, you are wealthy.

Options traders are increasing bets that the steepest rally in the Standard & Poor’s 500 Index since the 1930s won’t survive September, historically the worst month for U.S. equities....

History shows that U.S. investors lose the most in September. The benchmark index for American equities fell 1.3 percent on average since 1928 that month, data compiled by Bloomberg show.

Mark Mobius said global stocks will drop as much as 30 percent following their recovery from last year’s rout as companies take advantage of the rebound to sell more shares.

“When you have these rapid increases almost without correction, you will definitely have a correction,” Mobius, who oversees about $25 billion as executive chairman of Templeton Asset Management Ltd., said in an interview.... “We can expect a lot of volatility.”

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“There is a real danger this is going to be a double dip and that after six months or so we’ll have some more bad news,” Feldstein, the former head of the National Bureau of Economic Research said....

Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends....

Stocks tumbled around the world, led by China, while the yen, dollar and Treasuries rose as investors speculated that a rally in riskier assets has outpaced prospects for economic growth. Energy and commodity prices also slid.

The MSCI World Index of 23 developed nations sank 2.8 percent at 4:12 p.m. in New York, the biggest retreat since April. The Standard & Poor’s 500 Index lost 2.4 percent to 979.3 after China’s Shanghai Composite Index slumped 5.8 percent, the most since November....

“The stock-market reaction overseas has woken people up to the fact that it’s not going to be a straight line up,” said Myles Zyblock, chief institutional strategist at RBC Capital Markets in Toronto. “People are starting to question the strength of the recovery.”

Question, Mort: Is the economy leveling out?

MR. ZUCKERMAN: No, I don't believe it is. It is not falling off the end of the table. It is just rolling downhill at a slightly lesser pace in the last couple of months. But we are by no means through this recession and we are by no means through the problems created by higher unemployment. Homes where the mortgage exceeds the value of the home, which today is 25 percent of the homes -- Deutschebank predicts that in 2011, 48 percent of the homes will have mortgages that exceed the value of the homes. That is a huge, huge event in this country. It will affect everybody's sense of net worth and the consumption economy that we are relying on. So we're not out of the woods. I'm not saying it's going to be a depression, but we've still got a lot of problems ahead of us.

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[Cash for Clunkers] MR. BUCHANAN: It was $1 billion. That's about one-tenth of 1 percent of the stimulus program. One of the problems, John, is that the banks still have this big, cancerous tumor in their belly. All these bad toxic paper are being kept on the banks' books at 100 cents on the dollar. You're going to have commercial real estate crashing.

MarketWatch) - The U.S. economy expanded at a 3.5% annual pace in the third quarter, as massive government stimulus helped drag the economy out of the longest and deepest recession since the 1930s, the Commerce Department estimated Thursday."

The Federal Open Market Committee (FOMC) decided at its November 2009 meeting to keep the Federal Funds Rate target range unchanged between 0% and 0.25% and reduced the size of the agency debt purchase program slightly to US$175 billion from the previously announced maximum of US$200 billion. The Fed will still purchase a total of US$1.25 trillion of agency mortgage-backed securities. The FOMC stated it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The FOMC made only a slight change in its statement to emphasize the importance of labor market slack to its decision.