<my neurons are getting phrag-de-mented>
Hahaha!! And with Jay's hard drive needing dephragging, we are all looking a bit dephragged and demented.
Not to worry, the financial gyrations are all as per expectations of several years ago now. Where my estimations were wrong was in the scale of the crunching of debt and how long it would take to go through the process.
I am delighted and surprised [including the near-miss startle of the financial equivalent of learning that a 10 km diameter space rock shot past earth, missing by 300 km last night]. We just got hit by a few lumps of financial debris as it passed. Uncle Al cranked up the financial force fields and deflected the monster sufficiently off course that we suffered only minor tsunamis though there are still plenty of associated incomings to deal with.
I'm delighted because I did worry that rather than the deflation of the bubble that we had, it would be a cascading collapse of margin on margin on margin and no time to clear the markets ready for the next stage of financial implosion. Heck, even with the 11 September attacks and Japan's staggering load and Argentina and this that and the other, we have stayed stable. Which gives me great confidence - I would certainly have expected implosion if I had known what events would transpire. The fact that we didn't get cascading collapse makes me think the financial systems are more robust than I imagined and political stability is greater than I hoped.
I'd have cut and run if I knew what would happen.
Now, I'm feeling so smug that I think we can discount the events of 2003 as leading to global financial mayhem.
When Saddam lets rip at Israel with whatever he has got, they'll consider it undue provocation and will render Saddam impotent if not dead. I think dead is almost certain as they would hunt him down in Syria or wherever. Syria would hand him over rather than face the consequences of Israeli nuclear civil engineering. Baghdad would likely show to the world yet again the consequences of nuclear war, which would probably dissuade India and Pakistan from scaling up from soldiers shooting at each other on the border.
Hu Jintao will not be unduly provocative over Taiwan and North Korea will not choose to do anything too foolish.
Anyway, I digress. My point is the world will cope with a missing Baghdad, a bit hole in Tel Aviv. Horrific though such events would be, on the global scheme of things, as with the Twin Towers destruction, they are trivial. Looking back from 2010, they'd be minor glitches in the global landscape.
The big stuff remains the geopolitical stability of the major centres [China, Russia, Japan, USA, Europe, Auckland]. India is big stuff though not economically. Even in a full-scale war with Pakistan, it wouldn't be a big deal in the long run.
Back to Uncle Al. He's kept the show on the road, doing his job of maintaining the trust in the US$ and all signs are that they will continue to do that. There is no inflation and he has explained [as did Milton Friedman] that there isn't going to be any deflationary implosion. That's because they can pixelate and phragment as many dollars as are necessary.
When he does that, which seems likely to me, and I've been ranting that he would do it since May 1999 [and since 1997 or thereabouts as a theoretical idea], he'll be shrinking the measuring stick. That will mean things which should fall in value in a deflationary vortex, such as houses, will actually stay stable [more or less] and things such as gold, which are in fixed supply [in the short run] will go up in price due to the measuring stick being shrunk.
Things like QUALCOMM, will also go up in price. Oil and other commodities which are not labour intensive will also go up in price unless there are countervailing effects such as an oil glut due to reduced demand and increased supply - unlike gold, oil production can be turned up at the spigot, even if Iraq's production is cut off for a while. Saudi Arabia can crank it up quickly.
But as the world returns to normal after a couple or a few years, gold price will gradually revert to the long run marginal cost of production an Aztecs will go on with their bauble wearing and mystical incantations. QUALCOMM and cyberspace will barely blink at the whole process, just as we don't worry too much about monkeys squabbling in Madagascar.
Through thick and thin, people need communication and knowledge. QUALCOMM delivers both in real time and everywhere. On the go or being slow, CDMA's the way to know.
There isn't going to be a gold standard. Uncle Al isn't heading in that direction.
Gold will go up with fear when Uncle Al pixelates as necessary [as he has been doing for some time]. But since gold production costs won't increase much [since there won't be inflation], the long run marginal cost of production won't increase substantially.
With stability, people will once again get bored with watching their stupid ingot just sitting there, doing nothing. They'll want to swap it for something more inspiring [such as groceries, fun, cyberphones, cyberspace or return on investment].
After a while, Uncle Al will start increasing interest rates to defend the pre-eminence of the dollar. It will be back to 7% interest rates for dollar holders and gold holders will be whining like a fleet of Koreans [who will really be giggling over their CDMA profits when nobody is looking].
It makes sense to me.
Despite gold's recent ramp up to $344, it's still [barely] behind 10xQCOM [currently $370]
Print away Uncle Al! [Though I am supposed to have swapped out of my US$ but missed a couple of boats and the damn tide's going out leaving me high and dry if I'm not careful]
Mqurice
PS: That's the short version! |
