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

To: Raymond Duray who wrote (40868)	11/5/2003 4:27:06 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

<<Capitalism is an evil and inhumane system>> Perhaps, but once this system has overproduced, it has the power to redeem itself. The system produced efficiencies whereby resources to improve our lives cost a fraction that it cost 100 years ago. It improved itself through several waves of Booms, Busts and Recoveries that today, only by acting real stupid it can be derailed. Stupid like this one we are seeing perpetrated right now. To remediate this myopic economic policies it is necessary to spread capital more evenly. Taking it from countries where there is no economic activity but lots of capital, to countries with lots of economic activity but lacks it. Is this or take people from where there is no capital to where this capital is piled up.

To: Raymond Duray who wrote (40868)	11/5/2003 3:56:55 PM
From: Mark Adams	Read Replies (2) \| Respond to of 74559

>>In the past, I've stated that because of the Net Present >>Value function and discounting of future cash flows, our >>culture has a fixed mindset about 'harvesting' all >>possible resources ASAP. We know this clearly isn't >>sustainable, Right then, let's agree right here and now that the entire basis of Western economic theory is a crock of sh!t. It has always assumed that the planet is infinite and that depletion isn't a word in the vernacular I thought a bit more about this last night (I really need to cut back on the coffee). Using NPV/Discounting suggests that a dollar in the hand is worth more now than a dollar in the future. On the surface this makes sense, especially in an inflationary world. But it isn't true. I have enough dollars today, it's dollars 30 years from now I'm concerned about. My solution is to try to accumulate or save even more dollars so there is a better chance I'll have the dollars I need in the future when I'm less able. Doing this creates a new problem, where to put those dollars where they might be safe from all the dangers in the world. Then I take your ocean harvesting problem as a simple example. I have a very small freezer. Having a fish in my freezer is a good thing. But using NPV calculations, I maximize value by harvesting as much fish as I can today, because fish translated to dollars tomorrow are worth less, due to NPV. Taken to the extreme, I harvest all the fish in the ocean today. Then what happens? The price of fish drops to near nothing, as people are tired of eating fish and want some beaf instead. There is no more room in all the freezers in all the world to store all the fish! Far better to let the fish be stored in the ocean, where they can swim about and do their part for the eco system, until they are needed. So relying on NPV to maximize my personal wealth, I've overlooked another factor- that being the marginal demand and the marginal capacity of the ocean to produce fish. Ideally, I want to harvest fish at the level which prevents over crowding in the ocean and does not exceed consumer demand. The example of gather storing dollars is not unlike the more concrete example of gather and storing fish. This is a major macro event taking place today, as industrialized worlds attempt to prepare for aging demographics and newly created wealth in developing nations seeks a safe harbor for savings. And if you look at the root cause- it is distrust. Everyone is looking for a safe place to store accumulated wealth, because of past history with INFLATION! AND Inflation is the reason NPV calculations say a dollar harvested today is worth more than a dollar harvested tomorrow. AND THE CENTRAL BANKERS HAVE SWORN TO DO EVERYTHING IN THEIR POWER TO PREVENT DEFLATION, which turns the NPV calculations upside down and say a dollar harvested tomorrow is worth more than a dollar harvested today. If I can sell a fish today for a dollar, and next year for two dollars, maybe I should let that fish swim a bit longer and enjoy a siesta. God forbid we all take some time off and enjoy the fruits of our toils... Deflation in commodities is the natural order of things per Faber, as productivity improves decreasing the cost of production. Yes, traditional views don't take a holisitic view of the costs. But don't let that cause us to lose sight of the real problem. Mondragon Cooperative System He actually brings this up in Soul of Capitalism as a potential example. I may have stumbled onto another clue late last night. Why is it we all so casually drag two tons of steel/rubber/plastic with us everytime we wish to purchase 20lbs or so of groceries? That is horribly inefficient- and offers a clue or two about how society might be structured a bit differently to get more pleasure out of less resources. What if I could use a 200lb car made of advanced composite materials instead? What if communities were structured slightly different, so that normal errands didn't require moving massive amounts of weight over great distances routinely? This type of thinking is being done by people concerned about depletion of fossil fuels and their potential impact on our traditional way of doing things.