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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (1614)	3/18/2001 12:22:52 PM
From: Ahda	Respond to of 24758

I don't know if I am on the right train of thought or not. The case of the vanishing dollar. I think of people as ability and the end result is the products they create. Let us assume you buy a vacant lot and build a mall. You build that mall with the thought of deriving income from the rental of it. At the time you build the mall you are not aware that sixteen other malls are being built in that area. In other words for some reason you don't do the research and neither does the bank, this is an easy money policy. You find you can't rent the space that cost you two million to build. You aren't able to make your payments on the property. You and the other sixteen malls all in the same shape, all lowering rents to attract tenants. There is too much space available and not enough renters so the value of your property in terms of others willingness to pay has diminished. The bank calls your loan and takes over. Now the bank tries to sell your 200 million project and finds it is no longer valued at two million. It is now worth 100 million as people will only pay 2.00 per square foot rental instead of your original estimate of four. ( this is simplified as malls work on per square foot and percentage of profits base). The dollar value price decreased due to the fact that no one would buy it for the price you paid as they can't get the return from it. At the lower price of one million the rentals would cover the cost of the loan and give a profit to you. Long story short, when you have many dollars and loose credit there is less chance of creating dollars from dollars. Value in the business world is that, that creates dollars. When it does not create dollars it is valued for less dollars. One mall can command twenty dollars a square foot as there is no where else to go , three might make it but sixteen equal too many, too many dollars spent and less value returned. The only thing that vanished was the hope of cash return from the property and your bank account. If we take sixteen companies and assume they all attempt to build sofas we find that the competition between the sixteen sofas makers will probably create three companies that can survive. Most likely one will cater to low price one to high quality and one to the mid end line product. All dollars were given out by the Fed for these companies to create value. Thirteen of them went didn't create a long range value. At the beginning of the sofa boom, sixteen companies managed to create a dollar flow into other companies. The people who were employed by these companies created a rise of sales in the food companies. They began to feel they could afford to offer more exotic products the public was requesting. The premise of the Fed now is to ever have money in the economy and by so doing avoid a period where too many sofa makers gradually becomes fewer. So the thirteen that did not make it becomes table makers. They are trying to eliminate the process of valid growth which is a system of expansion and contraction determined by the needs of the public. Now the Fed attempts to by pass need and turn this into constant growth. The difficulty is each time a business starts the wages of the employed push more money into the economic structure, More cash buys more. Many purchase products so production gears up to meet those demands. This is all fine and dandy except for the closures of non profitable business which translates to fewer jobs. In the meantime manufacturing has geared up for more products and whoops the demand for products isn't there. The dollar did not vanish but the value of the product it represented decreased. The greater the amount of capital that is allowed into the economy and the easier financing becomes, the more start up businesses are created. The risk however in this easy money policy is that far more businesses will fail than succeed. Lots of dollars invested and little hope of it creating dollars becomes the vanishing dollar.