Bob, some talk today about margin calls forcing those
who borrowed money from the broker to repay the loan.
Good guess that most of the payback money came from
the selling of shares by the one needing the cash to
payback the loan. Almost a worst case happening if
one borrowed $10,000 to add to upfront $10,000 cash
to buy $20,000 of stock, with the end result being
worst case for the investor to end up with no shares
and a $10,000 lost. So, the broker got back his loan
of $10,000 plus interest, and someone bought $20,000
worth of investment by the investor for $10,000.
Just seems to me like a transfer of
(1) $10,000 from the broker to investor,
back to broker plus interest for a $500 return
(2) Investor lost $10,000 in the market.
(3) The $10,000 investor lost in the market
still exist as wealth, but now someone elses.
The money supply still the same,
with the price of gold near unchanged
its near zero inflation compared to gold,
but stock shares are lower, say 50%
so its deflation towards stock price,
less money to buy same amount.
Doesn't seem much of an economic worry if all that happens
is that a constant money supply simply changes hands
from one person to another in the arena of gambling in the
stock market to see who does not have a chair to sit upon
when the dice/music stops and "We have a winner/loser."
But what if the initial $10,000 man showed broker was not
cash from the saving account, but it itself was borrowed
money, as many have commented on this thread that the debt
in USA is large.
ok, so investor cannot pay back the initial $10,000 loan
to the credit card company or bank. Seems that that may
be where the biggie problem may end up. But then if the
Fed bails them out with taxpayer money, then its as if all
the taxpayers in the country pooled money as an insurance
policy to save those who gambled in the stock market and lost.
As if, if only 1/2 tax payers gambled in market,
and 1/2 of them lost and can't payback loans,
and Fed bails out the banks,
then 3/4 of taxpayers lost a percentage of their savings
to help bail out the banks, while these 3/4 did not default
on any loan payments.
Ya, life is unfair and blame it on the laws passed by the
government Leg. branch, the Congress of which the taxpayers
voted in office to do the peoples' wishes.
Guess the economy crashing or not hangs on the amount
and location of where the borrowed money points to and
is linked to. A simple credit card default will be passed
along as increased rates for those who still have the card
because of good standing, as they pay for others misuse.
Sounds like inflation. But then if borrowed money points
to a real object like a second morgage on a person's house,
then they lose the house I think. Just a transfer of the
house from them to them, so no big deal as the wealth is
just transfered from those to them.
Unless its bigger than big, these loses and transfers,
and at a point the number of hurting financial folks
reaches a level that their buying/consumption starts
that ripple effect causing the producers to sell less,
and the circle feeds on itself, causing less wages,
less taxes, less onto less creates less = depression.
Will be a silver/gold lining if paper money is identified
as being the cause thru too much printed for too much debt
creation as paper points not to value but to the thoughts
of politicians to pump up the volumn and create a bubble.
Could cause real stores of value to explode,
all precious metals.
(off topic)
I did one of those to myself,
"What weights more, pound of lead or pound of feathers?"
no = <<assume the weight of silver is atleast 3/4 that of gold>>
yes = <<It is about half,
AG is 10.5 grams per cubic centimetre versus AU at 19.3>>
ok, assume gold is $250 and silver $5
assume have $250 to buy physical
get 1 oz of gold or 50 ozs of silver
and weight is density so in equal size
same size of silver and gold piece
silver is 1/2 the weight as the same size gold
so a 2 oz piece of gold is same size as a 1 oz piece of silver
or fluff up the silver like Ivory Soap it Floats thru
an injection of weightless air bubbles
so the above 50 ozs of silver
is 100 times the volumn, space required,
as the 1 oz of gold.
So same money invested,
need 100 times the storage space for silver
rather than gold,
or is it 50 times ?
I Think
I Hope
I Am
MayB
Doug |
