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Financial crisis: Countdown to recovery
telegraph.co.uk — We're in the middle of an economic cataclysm - but Martin Vander Weyer thinks he can predict the day when things will pick up...
msaleem- 85 diggs
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- TheDataWhore, on 10/12/2008, -1/+1The question is whether governments will postpone the problem and make it worse for the future, or go into a depression now. It is unlikely that we'll see an honest attempt at fixing the problems of a debt based monetary system.
- AlaskaLoneWolf, on 10/12/2008, -0/+1I've been saying that it was time to short-sell for weeks, that we'd be in a bear-transition slash bear market by fall for months. All the signs are there. Think about this though, if the market is flooded with worthless stock, options, and derivatives that clog the financial balance sheets, when the retail market gets hit with horrible fourth-quarter sales... where do you think the money will be made? The government pouring money into Wall street isn't going to work. Historically, it's never worked:
http://en.wikipedia.org/wiki/Great_Depression - sundamole, on 10/12/2008, -1/+1No one is wiser than others. No one can predict these markets.
- dildoolielly, on 10/13/2008, -0/+1Wrong song, dingdong, someone already has and pretty damn accurately too!
His name is Peter Shiff, I suggest you listen to what he says,
http://www.youtube.com/watch?v=4n3g5lUgkWk&feature ...
- dildoolielly, on 10/13/2008, -0/+1Wrong song, dingdong, someone already has and pretty damn accurately too!
- 1053r, on 10/12/2008, -1/+3I'm not sure why everyone is always so down on the debt based money system. It has presided over the largest growth in productivity in human history. Here is an attempt at a balanced set of pros and cons, for each of the three major types of currency.
Debt-based pros:
1) Inflationary, but not overly so. If money is too strong (or worse, deflationary), then there is no incentive to invest instead of leaving your cash under your mattress. Investment keeps the money moving around, which helps prevent large shocks when someone suddenly orders 50 million widgets using cash that has been out of circulation (and therefore factored out of existence by the invisible hand) for 30 years.
2) Money is created based upon the action of the market. People only create money (i.e. take out loans) when they think they will be able to pay things off. Assuming an honest assessment (and those who are dishonest about the ability to pay tend to get screwed, as with the people losing their homes and all the banks collapsing right now), who is better suited than a lender and a borrower to create money as needed all over the market place?
Debt-based cons:
1) Govt debt is required to balance consumer debt. Since all consumers are in debt, and all need more money to pay off that debt than they borrowed, the govt MUST distribute money through deficit spending (usually either social programs or the military industrial complex) to make up for this. This doesn't have to be a bad thing though, because if the money is spent on large social welfare projects which benefit the whole population, then this actually turns out ok. Govt debt is really just a number, and can get as large as it has to.
2) A small group of people get wealthier and wealthier. Since the bankers are allowed to earn interest on money they don't have, they get wealthier and wealthier. Still, keeping them in caviar and learjets isn't too big a drain on productivity of the system as long as they don't get TOO wealthy.
Fiat-based pros:
1) Inflationary or deflationary as needed. Money policy can be tuned to be as soft or as hard as needed, assuming the people printing and destroying money are saints and economic geniuses.
2) No drain on the economy. Fiat money doesn't require storing a useful commodity in a hole somewhere out of circulation like gold, or inherently make a small group wealthy based on interest payments.
Fiat-based cons:
1) This is a big one. There is a huge conflict of interest between the people printing money and the people using the money. If it is a government, the government will probably never have the maturity to keep a balanced budget, preferring to vote in pork-barrel plan after pork-barrel plan designed to funnel value to their cronies (and themselves). Even in the US, our democratically elected leaders can't ever balance the budget (perhaps that is because it would be a disaster since we have a debt based money system, but more likely it is because they don't EVER want to have to say no to a special interest group). If a private entity is printing money, then there is even less accountability, and even more conflict of interest.
Commodity-based pros:
1) Sound monetary policy. Since there is a limited supply of gold, or silver, or watt-hours, or oil, or whatever, you can be sure that the monetary policy will be sound. However, since gold or silver or watt-hours or oil are all useful for doing and making things, the amount of money tends to go down very slowly over time (barring huge finds which create sudden inflationary shocks).
Commodity-based cons:
1) Monetary policy tends to be TOO sound. If the general trend is for no inflation or slow deflation, then there is no incentive to invest. A person is better off keeping their money under their mattress. This lends to hoarding. When hoards are spent or found, huge and sudden shocks to the economy are created.
2) The supply of money has nothing to do with the optimum amount of money. For any particular moment, there is an optimum amount of money in circulation. However, since the amount of gold or silver or watthours or oil tends to fluctuate based on other criteria, namely supply and demand of that commodity, then there is rarely an optimum amount of money achieved. This leads to huge amounts of inefficiency.
I think that when looked at from a balanced perspective, the debt-based money system is the sane choice. There is probably something even better. But debt based money is like democracy. It is the worst kind of money system there is, except for all the other kinds. - hdar3415, on 10/13/2008, -0/+2Error 404
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