Originally Posted by vnmonica

I think consumers will keep spending regardless of stagflation, recession or depression. There will always be a need and supply for the staple basket of goods and the majority of the population are just too spoiled and greedy not to keep buying. Sure big ticket items may slow, cars, houses, travel, but they won't stop completely. I think we've grown too accustomed to "buy now, pay later" to elevate our standard of living and those that live by that standard should be hit the hardest for living WELL BEYOND their means. There is a difference between spending/supporting the economy with prudend credit purchases and overdoing it.
But we don't have any control over inflation which eats up our spending money. Those of us who are not "spoiled" by all the nice things that money can buy (fixed income seniors, single parents, disabled or health problems) already have little or no choice in a low standard of living and should not continue to get hammered further because of high inflation.
Am I making any sense, or am I just rambling on???

Originally Posted by Terri Belkas

The rich may be able to keep spending, but the poor (or those on a fixed income) will not. The question is, how 'rich' can the rich stay when their assets (home prices, stocks, etc) are depreciating rapidly. I don't doubt people will continue to spend, but the key point is whether consumers spend enough to keep sales growth positive and the economy expanding.

Originally Posted by vnmonica

I'm wondering this too. Stats show that 40% of households are over their credit limits and can barely make ends meet now, which leaves 60% of households still capable, in some way, to spend. If those stats are accurate, we should be able to weather quite a bad slowdown and a recession shouldn't last too long. (but hey, I'm new at this, so what do I know about recessions!?!)

Originally Posted by Terri Belkas

This is very un-scientific evidence, but I have a friend who works for a non-profit in NYC. They hold a few large fundraisers throughout the year and are typically supported by big financial firms as well as individual contributors (I've volunteered to work some of these events and these people hand over $900 cash for donated trinkets...needless to say, they do well for themselves). Apparently, the individual contributions have been pretty lackluster over the past few months, suggesting that the 'rich' aren't feeling as philanthropic. This doesn't necessarily mean that they won't be willing to drop hard cash on their loved ones, but the evidence doesn't bode well for spending either.

Originally Posted by vnmonica

I dissagree with that theory.....supply and demand would increase/decrease it's value. More exploration would go underway to satisfy supply needs (and greed needs for stockpiling) which would drive up the price. The same scenario for oil, eventhough oil and gold consumption is a little like comparing apples with peanuts. I think almost anything, if accepted globaly as a benchmark for "wealth" or "exchange" could be considered and then the supply/demand scenario would apply. However, I am sceptical that the gold standard would come back.

Originally Posted by Ivanovich

So you think we can just get more gold by digging forever? Because if you don't, and you believe gold is finite, then the only way ultimately to increase money that is backed by gold is to decrease the amount it is backed by, or remove the gold standard entirely. Otherwise, if you say that $1 has to be backed by $1 of gold, then you have to have enough gold in the world for all the dollars, euros, etc. that are backed by gold. Eventually, the gold cannot keep up, the money cannot be made and wealth is restricted.

Originally Posted by vnmonica

Interesting point. But isn't that, in a sense, what is currently happening with all the currencies?

Originally Posted by David Rodriguez

I'm not sure I follow, vnmonica. What do you mean exactly by "what is happening with all the currencies"? The current system of fiat money allows countries to create money without backing it by anything other than their word. This explains monetary supply growth and, by extension, inflation.

Originally Posted by Terri Belkas

FFF are aggressively pricing in a Dec rate cut...the probabilities of a 50bp cut have edged up to 12% from 0% last week. The next FOMC meeting will be the real test for Bernanke & Co...will they follow the market's lead or do as they've been suggesting in recent weeks and leave rates steady? Another possible scenario...they could leave the FF rate steady but cut the discount rate...

Thoughts?

Originally Posted by Ivanovich

Unless some cataclysmic data comes in, there will be no cut. Fed speak today all but said that markets do not dictate Fed action. Was a clear warning, but the market is ignoring at it's own peril.

Originally Posted by David Rodriguez

The funny thing is that markets have now aggressively priced in a full 100% likelihood of a cut. How do you like them apples?

I'm honestly at a bit of a loss to explain this kind of lunacy, but I'd have to agree that markets are seriously overestimating the likelihood of a cut--especially when we have speeches like that from the Fed's Evans just earlier today.