PowerSwitch

In order to keep the dollar up, the basis of US power, the Federal Reserve has promised to raise interest rates, but always in the future. The latest future is next month. The belief that a hike in interest rates is in the cards keeps the US dollar from losing exchange value in relation to other currencies, thus preventing a flight from the dollar that would reduce the Uni-power to Third World status.

The Federal Reserve can say that the stock market decline indicates that the recovery is in doubt and requires more stimulus. The prospect of more liquidity could drive the stock market back up. As asset bubbles are in the way of the Fed’s policy, a decline in stock prices removes the equity market bubble and enables the Fed to print more money and start the process up again.

On the other hand, the stock market decline last Thursday and Friday could indicate that the players in the market have comprehended that the stock market is an artificially inflated bubble that has no real basis. Once the psychology is destroyed, flight sets in.

If flight turns out to be the case, it will be interesting to see if central bank liquidity and purchases of stocks can stop the rout

A former adviser to Gordon Brown has urged people to stock up on canned goods and bottled water as stock markets around the world slide.

Damian McBride appeared to suggest that the stock market dip could lead to civil disorder or other situations where it would be unreasonable for someone to leave the house.

“Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work,” he tweeted.

“Crash advice No.2: do you have enough bottled water, tinned goods & other essentials at home to live a month indoors? If not, get shopping.

“Crash advice No.3: agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to.”

PS_RalphW wrote:The Dow Jones dropped 1000 points on opening, but rebounded sharply, presumably with CB help.

Mike Whitney wrote: What’s so odd about last week’s market action is that the bad news on China put shares into a tailspin instead of sending them into the stratosphere which has been the pattern for the last four years. In fact, the reason volatility has stayed so low and investors have grown so complacent is because every announcement of bad economic data has been followed by cheery promises from the Fed to keep the easy-money sluicegates open until the storm passes. That hasn’t been the case this time, in fact, Fed chair Janet Yellen hasn’t even scrapped the idea of jacking up rates some time in September which is almost unthinkable given last week’s market ructions.

Why? What’s changed? Surely, Yellen isn’t going to sit back and let six years of stock market gains be wiped out in a few sessions, is she? Or is there something we’re missing here that is beyond the Fed’s powers to change? Is that it?

My own feeling is that China is not the real issue. Yes, it is the catalyst for the selloff, but the real problem is in the credit markets where the spreads on high yield bonds continue to widen relative to US Treasuries.

The flow of easy money has inflated asset prices like stocks and housing in many countries even as they failed to stimulate economic growth. With growth estimates trending lower and easy money increasing company leverage, the specter of a debt trap is now haunting advanced economies, the Group of Thirty said.

The Fed has pledged that when it does hike rates, it will be at a slow pace so as not to strangle the U.S. economic recovery, one of the longest, but weakest on record in the post-war period. Yet, forecasts by one regional Fed president shows he expects negative rates in 2016.

It added: “The supportive actions by central banks can be useful, but there are serious risks involved if governments, parliaments, public authorities, and the private sector assume central bank policies can substitute for the structural and other policies they should take themselves. The principal risk is that excessive reliance on ever more central bank action could aggravate the underlying systemic problems and delay or prevent the necessary structural adjustments.”

Official interest rates have been at 0.5% in the UK since March 2009, the lowest level since the Bank of England was founded in 1694. Several European central banks have resorted to negative interest rates to fend off the threat of deflation, but Weber warned of the danger of side effects.

Little John wrote:Get rid of debt as fat as you can. For the average citizen, that's as good advice as it gets.

vtsnowedin wrote:

Little John wrote:Get rid of debt as fat as you can. For the average citizen, that's as good advice as it gets.

Yes cash is king in a depression or other financial crisis but being debt free and having cash on hand won't prevent the rest of the economy around you from going into the tank. No good being open for business if few if any of your customers have any money to spend.

Tarrel wrote:

vtsnowedin wrote:

Little John wrote:Get rid of debt as fat as you can. For the average citizen, that's as good advice as it gets.

Yes cash is king in a depression or other financial crisis but being debt free and having cash on hand won't prevent the rest of the economy around you from going into the tank. No good being open for business if few if any of your customers have any money to spend.

So, that means also reducing your need for money as much as possible. Long established principles on here, but:

- Insulate as well as you can
- Grow what you can
- Learn to make, mend, repair, etc.
- Keep a few chickens

(Ask any Russian).

vtsnowedin wrote:

Tarrel wrote:

vtsnowedin wrote: Yes cash is king in a depression or other financial crisis but being debt free and having cash on hand won't prevent the rest of the economy around you from going into the tank. No good being open for business if few if any of your customers have any money to spend.

So, that means also reducing your need for money as much as possible. Long established principles on here, but:

- Insulate as well as you can
- Grow what you can
- Learn to make, mend, repair, etc.
- Keep a few chickens

(Ask any Russian).

Well I insulated the house pretty well when I built it and I heat it exclusively with wood so I'm good there even if I'm not up to Pasivehause standards. We have been too busy at work to do much gardening this year but the land is there if and when I need it. I did just buy a used set of disk harrows and another set of two bottom land plows so have the ability to grow much larger crops if needed.
I built my own house, every thing except the standing seam roofing, and including the plumbing, wiring and concrete. so have the repair thing pretty well in hand. We have done chickens for both meat and eggs but again have got too busy to fool with it at current prices. The coop and brooding equipment is there if I need it. And I sighted in a new shotgun today for deer hunting next month. So all in all I'm in pretty good shape come what may.

Tarrel wrote: We're not allowed to shoot deer with a shotgun here, or a bow or crossbow for that matter. 0.240 minimum calibre.

vtsnowedin wrote: Built up areas go with shotguns to reduce the chance of a stray shot reaching a house beyond the visible trees etc.

biffvernon wrote:

vtsnowedin wrote: Built up areas go with shotguns to reduce the chance of a stray shot reaching a house beyond the visible trees etc.

They allow hunting with guns in built up areas. USA is deeply, deeply bonkers.