Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Ilaine who wrote (48791)	4/20/2004 1:34:40 AM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hello CB, I am puzzled, but am happy to remain puzzled; you adequately defined 'bubble', or so it seems, but you apparently have no opinion on what the three top bubbles might be at this time. <<I'd advise the Chinese government to listen to Greenspan and Bernanke, rather than you, but would bet 99.9% odds that they won't.>> ... I am then 99.9% comfortable with that assurance. <<In the meantime, dollar up, should be interesting too>> IYO, is the Dollar up good or bad, macro-wise speaking? J

To: Ilaine who wrote (48791)	4/20/2004 1:39:23 AM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

CB, Another question, do you think this story achamchen.com could have ended up differently if interest rate was lowered and liquidity gates were opened wider? E-book available here knowledgerush.com FOREWORD BY MR. JOHN MACKAY I am greatly indebted to the generosity of Mr. Andrew D. White, the distinguished American scholar, author and diplomatist, for permission to print and to circulate privately a small edition of his exceedingly valuable account of the great currency-making experiment of the French Revolutionary Government. The work has been revised and considerably enlarged by Mr. White for the purpose of the present issue. The story of "Fiat Money Inflation in France" is one of great interest to legislators, to economic students, and to all business and thinking men. It records the most gigantic attempt ever made in the history of the world by a government to create an inconvertible paper currency, and to maintain its circulation at various levels of value. It also records what is perhaps the greatest of all governmental efforts--with the possible exception of Diocletian's--to enact and enforce a legal limit of commodity prices. Every fetter that could hinder the will or thwart the wisdom of democracy had been shattered, and in consequence every device and expedient that untrammelled power and unrepressed optimism could conceive were brought to bear. But the attempts failed. They left behind them a legacy of moral and material desolation and woe, from which one of the most intellectual and spirited races of Europe has suffered for a century and a quarter, and will continue to suffer until the end of time. There are limitations to the powers of governments and of peoples that inhere in the constitution of things, and that neither despotisms nor democracies can overcome. Legislatures are as powerless to abrogate moral and economic laws as they are to abrogate physical laws. They cannot convert wrong into right nor divorce effect from cause, either by parliamentary majorities, or by unity of supporting public opinion. The penalties of such legislative folly will always be exacted by inexorable time. While these propositions may be regarded as mere commonplaces, and while they are acknowledged in a general way, they are in effect denied by many of the legislative experiments and the tendencies of public opinion of the present day. The story, therefore, of the colossal folly of France in the closing part Of the eighteenth century and its terrible fruits, is full of instruction for all men who think upon the problems of our own time. From among an almost infinite variety, there are four great and fundamental facts that clearly emerge, namely,-- (1) Notwithstanding the fact that the paper currency issued was the direct obligation of the State, that much of it was interest bearing, and that all of it was secured upon the finest real estate in France, and that penalties in the way of fines, imprisonments and death were enacted from time to time to maintain its circulation at fixed values, there was a steady depreciation in value until it reached zero point and culminated in repudiation. The aggregate of the issues amounted to no less than the enormous and unthinkable sum of $9,500,000,000, and in the middle of 1797 when public repudiation took place, there was no less than $4,200,000,000 in face value of _assignats_ and _mandats_ outstanding; the loss, as always, falling mostly upon the poor and the ignorant. (2) In the attempt to maintain fixed values for the paper currency the Government became involved in an equally futile attempt to maintain a tariff of legal prices for commodities. Here again penalties of fines, of imprisonments and of death were powerless to accomplish the end in view. (3) An wholesale demoralisation of society took place under which thrift, integrity, humanity, and every principle of morality were thrown into the welter of seething chaos and cruelty. (4) The real estate upon which the paper currency was secured represented confiscations by the State of the lands of the Church and of the Emigrant Noblemen. These lands were appraised, according to Mr. White's narrative and other authorities, at $1,000,000,000. Here was a straight addition to the State's resources of $1,000,000,000. It is ominously significant that within one hundred years under the "Peace of Frankfort" signed on the 10th May, 1871, the French nation agreed to pay a war indemnity to victorious Germany of exactly the same sum, namely, $1,000,000,000 in addition to the surrender of the province of Alsace and a considerable part of Lorraine. The great addition to the national wealth, therefore, effected by the immoral confiscation of the lands in question disappeared with compound territorial interest added under the visitation of relentless retribution. Public opinion in our own country is so far sound on the question of currency, but signs are not lacking in some lay quarters of an inclination to sanction dangerous experiments. The doctrine of governmental regulation of prices, has, however, made its appearance in embryo. Class dissatisfaction is also on the increase. The confiscation of property rights under legal forms and processes is apt to be condoned when directed against unpopular interests and when limited to amounts that do not revolt the conscience. The wild and terrible expression given to these insidious principles in the havoc of the Revolution should be remembered by all. Nor should the fact be overlooked that, as Mr. White points out on Page 6, the National Assembly of France which originated and supported these measures contained in its membership the ablest Frenchmen of the day. JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914. An excerpt on Page 29 states ... "Even worse than this was the breaking down of the morals of the country at large, resulting from the sudden building up of ostentatious wealth in a few large cities, and from the gambling, speculative spirit spreading from these to the small towns and rural districts. From this was developed an even more disgraceful result,--the decay of a true sense of national good faith. The patriotism which the fear of the absolute monarchy, the machinations of the court party, the menaces of the army and the threats of all monarchical Europe had been unable to shake was gradually disintegrated by this same speculative, stock-jobbing habit fostered by the superabundant currency. At the outset, in the discussions preliminary to the first issue of paper money, Mirabeau and others who had favored it had insisted that patriotism as well as an enlightened self-interest, would lead the people to keep up the value of paper money. The very opposite of this was now revealed, for there appeared, as another outgrowth of this disease, what has always been seen under similar circumstances. It is a result of previous, and a cause of future evils. This outgrowth was a vast debtor class in the nation, directly interested in the depreciation of the currency in which they were to pay their debts. The nucleus of this class was formed by those who had purchased the church lands from the government. Only small payments down had been required and the remainder was to be paid in deferred installments: an indebtedness of a multitude of people had thus been created to the amount of hundreds of millions. This body of debtors soon saw, of course, that their interest was to depreciate the currency in which their debts were to be paid; and these were speedily joined by a far more influential class;--by that class whose speculative tendencies had been stimulated by the abundance of paper money, and who had gone largely into debt, looking for a rise in nominal values. Soon demagogues [EDIT by Jay: achamchen.com ] of the viler sort in the political clubs began to pander to it; a little later important persons in this debtor class were to be found intriguing in the Assembly--first in its seats and later in more conspicuous places of public trust. Before long, the debtor class became a powerful body extending through all ranks of society. From the stock-gambler who sat in the Assembly to the small land speculator in the rural districts; from the sleek inventor of _canards_ on the Paris Exchange to the lying stock-jobber in the market town, all pressed vigorously for new issues of paper; all were apparently able to demonstrate to the people that in new issues of paper lay the only chance for national prosperity." J

To: Ilaine who wrote (48791)	4/24/2004 6:26:30 AM
From: TobagoJack	Read Replies (3) \| Respond to of 74559

Hello CB, <<Given the naivete of the Chinese government ... I'd advise the Chinese government to listen to Greenspan and Bernanke, rather than you>> ... Oops, I forgot, I am on your Ignore list. Shucks. No matter, This post to you is only for the purpose of immortalizing in my files something (pr, something else) you said: ... and something economist Roach said, not so much about politician Greensputin and charlatan BurnAndKaput, but some wise leaders and macro managers ... morganstanley.com "Once again, the world is hunkering down for the worst from China. Fears of a hard landing abound as the authorities attempt to cope with a seemingly explosive boom. In my view, those fears are overblown. Since the Asian crisis of 1997-98, China’s macro managers have defied the naysayers repeatedly. I suspect that a similar outcome is in the offing, as China once again succeeds in avoiding the pitfalls of the dreaded boom-bust syndrome. ... I remain confident that China will pull it off again — bringing its large and rapidly growing economy in for a soft landing over the next couple of years. Unlike their counterparts in most major economies of the world, Chinese policy makers are frank and transparent when they see a problem of macro management that must be addressed. Notwithstanding the intense debate over China raging in many quarters of the world, I can assure you that inside of China, there is no such debate. From the Premier, to the State Council (the Chinese cabinet), to the central bank, there is unanimous agreement that forceful action needs to be taken to bring China’s lending-driven, investment-led, overheated economy under control. The People’s Bank of China has, in fact, tightened monetary three times in the past seven months in an effort to do just that. Like all central banks, it is mindful of the lags and will probably pause to assess whether the medicine is working. But if there is no slowdown in the months immediately ahead, I have little doubt that further tightening measures will be implemented. And I am equally confident that Chinese policy makers will keep acting until the economy flinches (see my March 24 Global Economic Forum dispatch, “China — Determined to Slow”). ... The wise men of China have no doubt that the current leadership has learned the lessons of macro management well. They lived through China’s soft landing a decade ago, and are convinced that the authorities are perfectly capable of pulling it off again. I couldn’t agree more. If my personal experience over the past several years tells me one thing, it’s not to underestimate the capacity of modern China to rise to the occasion. My bet is on another soft landing later this year and well into 2005." It would appear that China is at least trying to not commit the big fraud as you correctly described Message 20042246 the episode of Fiat Money Inflation in France . Chugs, Jay

To: Ilaine who wrote (48791)	10/29/2004 8:35:50 AM
From: TobagoJack	Read Replies (4) \| Respond to of 74559

Hello CB, <<I'd advise the Chinese government to listen to Greenspan and Bernanke, rather than you, but would bet 99.9% odds that they won't.>> Congratulations, you are right! Here we are, my 10,000th post on SI. Or here I am at 10k post and there you are at 33,863rd post. I understand that the SI Ignore function is not working at the moment and so I take the opportunity to write to you to solicit your views on several matters and a few anti-matters. So, before SI revives the dreaded Ignore function, let me get to the great issues of the age: USA Election The democratic electorates are about to choose their leader once again, either admitting that they made mistakes the first time around, as in really screwed up for either voting for or against the incumbent, or fanatically, as in redoubling their effort while in obvious dire strait due to their earlier choices, vote as they did last time, for whichever party’s candidate they happened to have voted for. Looks like the crowd will have to decide, on the domestic front, whether to borrow and spend or tax and spend, in other words, go bankrupt now or Chapter 11 later. On the geopolitical side of the equation, the choices are almost equally not good for appetite, namely to vote for debilitating perpetual war or ballot for chaotic never peace. What to do, what to do? For the youngsters of voting age, I guess they must decide whether they want to be drafted into a war that serves to put gasoline in SUVs and maintain a militaristic philosophy of pre-emptive strike, strike again, strike once more, until striking no more. The problem with the current equation of the WAT-WOT-Whatnot War (“WWWW”) is that for one side it seems to be a forever until victory effort, and for the other side, for a while until fed up endeavor. What are your current views, seeing that you were an early and most enthusiastic supporter of the various battle initiatives? If you remember, we had an interesting (at least I thought so) discussion about the geo-politics and Bush-league maneuvers Message 17161813 , and I quote myself: March 7th, 2002 QUOTE On the interaction between Russia, China and the US, let me adopt a Maoist type analysis to the matter: 1. The world is comprised of contradictions (yin vs. yan); 2. From the US view, the major contradiction today is between the rise of China, and the sustainable supremacy of the US; 3. From the Chinese view, the major contradiction is between the rise of China, and the fall of China; 4. From the Russian view, the major contradiction is between the fall of Russia and the rebirth of Russia; 5. These contradiction will guide matters for the next umpteen years, and each vector of contradiction has its own momentum and velocity (mass, force, speed, direction) and equation of time (elapsed time during which momentum and velocity matter); 6. The US efforts to enlarge NATO mainly serves to undermine Russia’s claim to future leadership of its ‘sphere of influence’, loosely delineated as the ex-USSR and Warsaw Pact countries. The enlargement of NATO is being characterized as something other than this transparent motivation, and does not fool a man such as Putin, and certainly cannot put the traditionally suspicious Russian population at ease. I agree with you that Putin is very smart, necessarily so, else he would not have risen to where he is today. The brutal nature of politics in countries such as Russia and China necessarily makes the current leadership “foxes” by definition; 7. The US willingness to “go MD with or without XYZ” and to unilaterally abrogate the Anti-Ballistic Treaty serves only to undermine US credibility as a treaty partner, and the US willingness to scuttle the Kyoto Treaty negotiations serves only to undermine the US as a negotiating partner. In an age where the world is requiring long term solutions for deadly problems, the US model of 4 year election, 2 term presidency, two party oligopoly, multiple and diverse interest group horse trade, is simply not dependable for solutions, not dependable for partnership, and not dependable for security; 8. I believe the Russians, Chinese on the mainland and on Taiwan, and even the Japanese are beginning to realize this, all attributable to Bush’s election victory. The damage Bush is doing to the US interest has been enormous, only not realized in the US; … 10. Ms. Rice is viewed as a pretender, and climber, of no particular substance, and dangerous; 11. In such circumstances, Bush is humored by all, even as they busily make their own preparations for their own needs. The US press is not realizing this at all, to my amazement, but then I have high expectations for people doing their jobs; 12. When two smiling foxes (Jiang and Putin) say they can do business with Bush, Bush will be taken on a ride; 13. So, my short term predictions – China will focus on the economy and nuclear parity, Russia will not reduce their missile count further, Japan will rearm, Taiwan will make nice with mainland, SE Asia will watch, cower, and stay very quiet, Europe will do what is best for itself (difficult, because to many interest groups); 14. Russia will need to, Putin willing, put economy ahead of democracy; 15. Any US financial aid given to Russia will end up in offshore banks via Cyprus. There is no shortcut to development of political economy and financial economy; 16. Germany and France will press for more substantive Euro, EU etc; and 17. EU may not hold. <<cultural ties between Russia and Europe>> There is very little similarity between Russia and rest of Europe, and what similarity there is, is washed away by bad experiences of European-American interventions in the past, and current aggressiveness in line with perceived Russian weakness. There is a reason why China and Russia have pulled troops back from the border, so that they can both concentrate on what matters to them most, control of their respective spheres of influence elsewhere, development of Siberia, and stability in Central Asia. China is bending backwards to be not threatening to Russia in her weakened state, and the US is shouting on top of lungs “we will do with or without you” “we will expand NATO to your doorsteps” “we will stop financing you”. BTW, the Russian submarine matter is on par with the Chinese Belgrade Embassy matter to Russia and China. America is playing the game all wrong, to America’s long-term detriment. America needs to listen to its geopolitical-aware folks. <<At the same time, the economic importance of China to Russia is also quite strong. They're going to try to have it both ways>> They can have it both ways, because American diplomacy will grow up fast, even with Ms Rice in charge. What must be, will be. <<The old balance of power may not have seemed like a balance to China, but it felt stable to us. China is the destabilizing factor, now.>> Rumsfield’s view is that China must be actively stopped from developing the means to challenge the US on any and all issues, which basically comes down to that China must be stopped from developing economically under politically and geo-politically stable conditions. This is a naïve, cynical, and sinister approach that has no support of progressive elements around the world, and certainly has no support within any faction of the Chinese population, and thus will fail. The US holler concerning democracy, Taiwan, Tibet and labor rights are all interpreted in light of such geopolitical noise, and this is precisely why relationship between the US and China is tense. The NY Times, and WSJ type rationales are all a side show to the main event … power geopolitics. This Rumsfield attitude comes across again even in global warming … as in “China emits the most greenhouse gas” which is counter-balanced by “person for person, US accounts for most of the emissions”. Matters are never as clear-cut, black and white, right and wrong, as the media would like to make it out to be. In the end, truth prevails and the good guys always win, god willing. UNQUOTE So, blah, blah, blah, and the bottom line is that China has been the stabilizing factor, and US the destabilizing issue, mainly because US diplomacy did not grow up, and so the US is busy trying to swipe off fire ants off its pajamas. On the bilateral relationship of Russia-USA, Putin is not turning out to be the friend you were counting on, because your premise was wrong. You were concerned at one time that the USA effort in the desert is diverting attention away from the true enemy, China. Well, China is busy doing what it is supposed to do, making what you buy. Enemy? Surely not, especially when it is most assuredly still a multi-polar world, lopsided, but multi-polar. Macro Economics Now that we have reviewed and updated the geopolitical situation, we can move on to the macro economic status. China, wisely, is stepping on the economic breaks, because 9+% growth rate is simply too fast. I suppose you could be one who rightfully doubt China’s official statistics. The trouble is in determining whether the official numbers are too high or too low. If you remember, you were and probably are still of the opinion that China’s move to slow the economy is a mistake. In case you forgot, I remind you … Message 20042195 <<April 20th, 2004 CB, Question 1: Did you mean to say your recommendation is to "not stomp on bubbles"? Question 2: Do you think there are material/substantive differences between construction/urbanization/industrialization bubbles and a consumption/housing inflation/financial valuation bubbles? Question 3: Do you have an opinion on what the top three bubbles are at this time in this world, in terms of scale, scope, and possible effects? On the matter of China and bubble, check this out Message 18226135 November 12th, 2002 Hi Pezz, on China: It will ramp into bubble dimensions and go 'pop' 24 months from today. [EDIT: Key words = China Bubble 2002] Wild guess, or I am lucky at spotting bubbles and scripting their demise. Last Question: What subject matters shall we discuss this round? Something controversial or something fun? Same really.>> In case you care, my latest read of the situation in China is here worldmarket.blogspot.com and antidote to the global macroeconomics is to worldmarket.blogspot.com Chugs, Jay