Well it's simple, if the dollar devalues against the say the japanese yen, then all products from japan will become more expensive.
The thing you have to remember is that our current 'prices' from say Japan is based off the exchange rate (obviously lol but we never think about it).
Now usually it's between 90-100 yen per dollar. Recently it's down to about 80. If the same thing happens again, like many people have said is most likely, then we could see our dollar devalue against others such as the pound, euro, yen, etc so that say the yen is 20 to 1. Well if you are charging 100 dollars for a product at 90 yen to the dollar, it would be 4.5x more expensive if the exchange rate is 20:1. Thus a 400 dollar vid card can become a 2000 dollar or higher vid card.
This is a conservative estimate, under the assumption we don't have extreme hyperinflation, and just really, really aggressive inflation that approaches the definition of hyperinflation, but isn't like zimbabwe or yugoslavia or weimar germany style hyper-inflation, which is also a possibility.
Considering we haven't changed anything revolving around the problem that caused last years crash, and if you realize that some companies, even those we bailed out, are even more leveraged (and more vulnerable) now than before, then you can see we could be right back where we were, especially with quadruple the unemployment. Actual unemployment in the U.S. is 20-25 percent. Not 10. 10 is the number receiving benefits. Not those that are not. We don't count them, we consider them 'not looking' which is a lie.
You have to understand leverage. When they say they (banks) were leveraged 10x, that means, if you lose 1 percent on your investment, you actually lost 10 percent because you were leveraged 10x. Well our companies are anywhere from 30-100x leverage. In fact I think goldman sachs is around 200-300 leverage with derivatives. Meaning, if someone was even a more industry average of 40x leverage, a 2.5 percent drop in their investment would wipe out 100 percent of the companies equity. 100 percent!!!!
How much did we lose last year? Exactly. We have a lot of bankrupt companies still in existence because they are keeping 'off book', or altering the value 'on book' of certain assets and debts.
There's also about 3-7 million homes being kept off the market, once those start hitting the market, housing prices not only must go down, they must go down dramatically. Which of course means the actual equity of banks then would be even still lower.
As you can tell now, when we're talking about quadrillions and 40x leverage, and 20-25 percent unemployment, and 3-7 million homes that are empty but not on the market, it doesn't take much to bring down the whole system.
All we did was make the payments with the 700 billion dollars to banks and insurance companies to keep the casino going, because if we didn't, the whole house of cards was going to go down.
From that banks started loaning again to each other (LIBOR overnight), but only because the USA is backing alot of that debt if it goes bad. Did you know the U.S. federal gov't is backing every home mortgage made this year? Did you know we also account for 90+ percent of all home mortgages made this year . We are also responsible for all the losses at fannie mae, freddie mac...which could be about 5-10 trillion dollars of nothing that we will probably have to pay out in the next couple of years there too. Finally we've turned hud which was used to make about 3 percent of loans usually to very low income people in poor neighborhoods to buy low priced homes. Well since fannie and freddie are screwed, we opened up hud. Now hud does 25 percent or more of our mortgages, as it became the new fannie mae and freddie mac, and look how bad they are currently doing. (they recently announced they were going to be below 2 percent cash reserves soon)
Had we not stepped in during the crash, jp morgan would of been gone in days, followed by citi bank, goldman sachs, wells, and that would of happened within a few days if they hadn't acted. But they shouldn't, because now our currency is toast.
We're paying for these dumb-holes casino tab, and destroying our currency in the process.
So for microsoft, if stuff imported from japan and the other asian countries become really expensive, the amount of new computers sold will shrink drastically.
Because the cheap emachine type computers that go for $300-500 would be $2000 dollars, and these can't even play games that are 3 years old decently.
If you want say a i7 920 setup, and it currently costs 1100-2k for a normal setup, it could be 5-10k next year. So microsoft would have to rely on people upgrading via their current computer, which of course is a smaller market than flogging windows 7 to the likes of dell, hp, and all the other computer manufacturers. Remember this is just if we go down to 20:1 yen. It could get alot worse than that.
People would still buy new computers, but I bet they'd sell 70 percent less than say 2007 or 2008 if the yen were 20:1. (and I'm being a bit simplistic, it's really all the asian countries, and we're sinking against all of them)
Sources, well plenty, i've known about and discussed at bars with real estate agents about the coming crash 5 years ago. So this isn't something that surprised me. I was telling people all around me that things were about to crash. They didn't believe me then, but it was as clear as day, and it's even clearer today about *tomorrow*, then it was then about that time period. Remember if you're involved, it can't be happening. At least that's the general human mindset.
The problem isn't real estate, it's the derivatives that funded it, and that got everyone in debt, raised prices, etc, etc. I literally could go on for about 100 pages. Basically though, all the banks are insolvent in the USA (and lots of other countries), and they are only currently operating because they're now legally allowed to lie about their finances.
They can say their homes on the books actually worth 100 million to be marked at 2 billion say. So when they say they have 10 percent equity, you have to realize it's more like -30 percent, and that's just from the mortgage backed securities, let alone the coming commerical mortgage backed securities, which are all the loans for business rentals, which are defaulting because of the bad economy.
Then you have to realize the derivatives game dwarfs all. What if I told you that jp morgan, wells fargo, citigroup, bank of america, and goldman sachs all had on average 30-40 trillion dollars in derivatives? (these are companies that 18 months ago at around their peak were worth 30-100 billion. These companies worth 30-100 billion THEN, not now, THEN, had 30-40 trillion dollars in derivatives bets.
All of which may be completely worthless, which means all of these companies might be literally 30-40 trillion in the hole. Especially if someone that owes them x amount of derivatives, goes under and cannot pay, which means those that were supposed to receive that money are now out x amount and can't pay on their derivatives, and the cycle continues. These are all worthless bets, except if they go bad, everything crashes. There's 1.4 quadrillion (or more) in derivatives. That's more money than exists in the entire world.
I voted for Obama, and am a lifelong democrat, but he's a fool for letting the bankers determine his response to the crisis, and it's going to cost him and us a whole lot. But of course it doesn't matter, any of our past 5-10 presidents would of done the same thing. This is all about 40 years in the making. You can thank nixon, ford, carter, reagan, bush I, clinton, bush II *don't forget that scumbag who started tarp*, and now obama. They all drank the kool-aid coming from wall street. They are ALL WRONG. History will show that, but first we have to live it.
If every bank had to realize their losses that happened last year, they'd all be bankrupt, or would be so destabilized by all the wrath from it, their good investments would be bad, and they'd be bankrupt even if they'd never traded derivatives.
So keep the derivatives game going, and through this you are monetizing debt, which then weakens the dollar like I described above. Or you let the derivatives crash, (and they are going to anyways) and everything collapses. Or everything as we know it does. Of course we aren't going back to cave men, but I wouldn't be surprised if 90 percent of business is gone by the end of this thing, or by the time we wake up and get out of it.
If you haven't noticed, we're going the bailout and monetization route which means inflation. But the crazy thing is, everything is currently crashing. So you really have deflation AND inflation at the same time. Deflation in the physical (real) economy. Inflation in MONEY and things valued in money - stocks, bonds, commodities, etc.
There's too much to write about what's going on. But I like to read a bunch of different stuff. So the guy that called this crisis, and actually developed his triple curve in 1996 (which perfectly describes in reality what we are currently seeing), was lyndon larouche. larouchepac.com He's a democrat, but you wouldn't know it with how much he's going after obama, and with good reason. So you have the left perspective here.
Also, there are economists who aren't drinking the kool-aid that are non-partisan, but if I had to guess they lean the other way, republicans before all this crap. So I suggest going to http://www.chrismartenson.com/
Take the crash course which is a 20 something part video you watch in 5-20 minutes segments. It's free. You can donate and such, but it's free. It'll be the most informative thing you'll ever watch.
Then go to those sites daily or so and read the updates.
So all together if you read those two sites, you'll get what some people on the left are thinking, and some people on the right-center are thinking.
Then realize that even though they are on different political leanings, both are saying the same thing basically.
As I've described it before, it's like I'm watching Shakespeare performed in two different languages.
That's what should scare you. It doesn't matter if it's a dem or a repub, those in the know on both sides know we're screwed. Those two sites will show you how and why.
Both from a historical and functional perspective as well as plans to get us out (hbpa of 2007 and the larouche 4 Power (US, russia, china, india plan) - larouche
and the market perspective - chris martenson
Also the martenson site every day lists a number of news articles from across the business spectrum, so you are reading lots of influential people's thoughts. I'm talking about some people that are even on CNBC and stuff.
Don't believe the corporate news media, they aren't telling you the truth. They say things are getting better, when everything is not only collapsing still, but worse than it was at the market trough, and is generally accelerating.
So yeah, it's my viewpoint if you want something from overseas, better hurry up and buy it before you can't afford it. (which is also the end game from outsourcing)
You outsource your work, your individual company profits, your competitors copy it, they make profits, lots of people in the sector are unemployed and usually get inferior jobs to work at the rest of their lives. Now multiply that over 40 years, and case by case, we did it to ourselves. We outsourced everything, and then because wages didn't keep up, we all went into debt. Now with all the debt crashing around us, and the bailouts of derivatives mistakes, our currency will lower, making all imports more expensive.
Soon that cheap chinese good you bought and know is crap, will be something you can't afford. Nice.
Considering how much we import, everything is just about to go up in price.
Also if you want to look at something look at the DIX, or dollar index. Watch that. That will let you know how much we've actually lost. People don't realize that if you subtract the inflation away from our stock market, we're still basically at 6-7k, just with our new more worthless dollar, 10k is the new 6-7k. But since it just started the ramifications aren't well known and people actually feel RELIEVED. But again the move compared to where it could go, is small indeed.
Remember if the dollar devalues, stocks go up because they are worth a certain amount, so if the dollar is worth less, they are worth more. So if we have dollar devaluation, we literally could see dow 100k but we're poorer than if it was dow 2k.
Or things could just collapse, or most likely, our dollar devalues, and everything skyrockets, and then slowly we're deflated as no one can afford to buy anything and eventually everyone loses.
But I like to look at the bright side, all those pri-madonna athletes that are whimps compared to 20-40 years ago or so, will actually have to play hard, because their multi-million dollar contracts are worth crap. So we'll have great sports to watch, if we can afford the electric bill. (remember oil is imported - as well as everything that contains plastic -which is just about everything around you - shampoo, carpet, chairs, etc, etc)
So yeah, sorry for the long post, but it's impossible to explain something so complex in less words, and I've only covered a small portion of the problem.
But I'm all for ending the fed, going back to the true american credit system (which is what the constitution says we must have) that Alexander Hamilton devised. Implementing HBPA of 2007, new bretton woods, four powers agreement, and a REAL space program. We do that, we can pull out of this. We do not, we're screwed. Individually, as each of us in our own boat, and somehow, some of us will be lucky, but 99 percent of us, are screwed if we don't right the ship soon.
Finally remember this, the American Revolution wasn't just about taxes without representation, it was about monetarism.
We didn't want our lives controlled by money, whose value is influenced by bankers in other countries. It is supposed to be illegal to have what we call 'money', it's supposed to be credit dollars, not money dollars. But since 1913, we've had money dollars via the federal reserve. We were supposed to create money, not let foreigners own a corporation that prints money and sells it to us with interest. It's a ponzi scheme scam, and it rules the world. (Anyone know what happened after 1913? Only started 1 year later. Probably wouldn't of happened had we not gotten on board and used as leverage by intertwining our system with London. Kind of gave them a monetary edge with it's monetary battle with Germany. Sometimes you just have to take a step back and see what business deals preceded big events. Like Britain and mussolini, or Prescott bush and hitler. The world that currently is, didn't just happen. It's what was created.
Believe what you want to believe, but I hope you go to those sites, read them, watch the videos, and enlighten yourself, and then get a couple of your relatives or friends to do it as well, etc, etc. It's only when we all know what the hell is going on, that we can act on it. Otherwise like the media the past year, we just keep asking the wrong questions, and thus demanding the wrong answers.
Good luck.
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