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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: marek_wojna who wrote (19521)	6/7/2002 11:09:27 PM
From: Maurice Winn	Read Replies (2) \| Respond to of 74559

Gee Marek, I've got a very large bet running on the US$, so I hope you are wrong. I'm betting heavily that my hero, Alan Green$pan, will run the currency well and defeat the forces of evil. The Indians being paid by Americans to do programming are probably being paid in US$ and maybe to offshore accounts. The US$ has got a lot of good work to do in the world and Uncle Al is aware of his responsibility to run a global currency, not merely a national currency. I've invested most of the rest in QUALCOMM, which is hiring people around the world and depending on sales around the world and they are drawing $billions into the US economy. They are being paid for ASICs and intellectual property. They pay taxes in US$ on those near-zero cost items. The USA can export intellectual property, currency, security and law. People around the world love it and are buying like crazy. The USA companies are hiring the lower paid people around the world to do the work. Those people use those US$ to buy CDMA phones, Big Macs and stuff. I am betting that the US$ has got a long time to run, but I am also betting that it will dwindle in importance as cyberspace currencies, backed by shares in companies, take over from US$. National currencies such as the Argentinian, Russian, Kiwi etc will gradually give up in the face of US$ and cybermoney. Uncle Al will defend the US$ by maintaining its value by controlling interest rates and rate of printing and a few other levers so that confidence remains in it. Despite the very large traumas of the past 7 years, from Mexico, to Russia, Asian Contagion, Y2K and Telecosmic implosion and Japan's bubble deflation, the US$ is sitting very solidly. Uncle Al should get an award for service to humanity. I believe what he has achieved is incredibly undervalued. Ignorant people blame the internut bubble on him. That's patently absurd and shows they have limited connection to financial reality. A sectoral bidding frenzy can happen and does happen in the absence of any money supply increase. New Zealand went through it in the 1980s in various sectors such as kiwifruit, ostriches, goats and the stock market. The crashes left many people financially ruined. There was no significant inflation in the USA over the 1990s and if the money supply was foolishly high, there would have been plenty of inflation. Sure, I have maintained for years that there is hidden inflation because the productivity boom enabled prices to remain constant instead of falling, which meant the money supply growth was a hidden tax. But that's a good way to get taxes because it requires no forms, compliance, inspectors or hassle, no gaols, bureaucrats etc and plenty of money is necessary to fund USS Enterprise to destroy Osama's gang. The fact is that prices were constant so there was not a surplus of money created. The internut boom was a puffball, inflated purely by the manic bidding of irrationally exuberant participants. Such a bidding frenzy requires only a tiny amount of money to change hands to keep the price rising. To explain [since many people don't seem to understand it, including many in this very stream]. A guy decided he liked an internet company so bought some shares one day. Next day, the price had jumped 10%. He was excited by the prospect that this was in fact a good company so bought some more, but the price had gone up before he got to his broker. He bought it anyway. Next day, the quotes were higher and he decided to dollar cost average and buy using all his income each month. Every month, the price went up a bit and after a couple of years, he was rich beyond his wildest dreams, because the shares he bought in the first year were now worth millions and even the shares over the past year were wayyy higher than what he'd paid. So, he phoned his broker and said to sell the lot! "I'm taking the family to live in Paradise and retire to the golf course, get a Lexus, a private jet, a boat like Larry Ellison's 'Katana' nzherald.co.nz and take it easy". He logged on to check the price and was amazed and panicked to see the price dropping precipitously. He phoned the broker to make sure he'd sold the stock and was dismayed when the broker told him only a few had sold. Feeling ill, he realized what had happened when his broker explained that he had been the only buyer over the past 2 years and the company was nearly bankrupt. Many of his friends had been recounting similar stories with their favourite internut stocks over the past two years and they were thinking of forming their own wealthy country on an island somewhere. Sadly, they are all back at work now, with nothing to show for their last two years of bidding the prices higher. Alan Green$pan was bemused and many were puzzled by the mania. They blamed it all on Uncle Al. Poor ignorant suckers. They said it was a money bubble which was the problem. No it wasn't. It was just their bidding higher and higher for something not worth anything. With their small incomes, they managed to create billions in market capitalisation because raising a share price requires zero transactions and no money supply. It requires only a change in perception on the part of those bidding. A market capitalisation of $100 billion can be created instantly if bidders raise a $1 stock overnight to $1000. No transactions are needed. Some people can't understand that and like to have a scapegoat to blame. The guy who minds the money supply is a handy figure to blame. Meanwhile, CDMA, CDNA, the mighty US$ and our idol Uncle Al with sidekick Mq are going to defeat the Aztec forces of evil. Like Neanderthals, the Aztecs will be culled from the evolutionary tree. You're either with us or against us. Mqurice