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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (42732)	12/14/2005 9:55:56 AM
From: 8bits	Read Replies (1) \| Respond to of 116555

"I think the mexican mother next door uses a prepaid VISA or Mastercard credit card with 500 dollars - it is not a promise to pay." Sure it is, however the Mexican lady has been taken out of the IOU layer. It's just a modern form of the check which most assuredly existed during the gold standard days. Now we have an IOU from VISA and IOU from the Merchant Bank and an IOU from the US Government. Any on of these entities can fail, the willingness of the merchant to take the Visa/Debit card is such that he thinks the likelihood of such an event is very low. (even though ALL of those events have struck many countries around the globe..) Ultimately checks, paper currency, numbers in a bank account, etc. are all promises to pay. A majority of the world's population in the last century experienced events in which their currency lost rapid value. (US currency experienced this in the 18th and 19th centuries and how a slow loss of value 95% in less than 50 years..) Considering the much larger global imbalances in capital we have and the IOUs we have to older generations in Western Europe, Japan, and the US I consider the possibility of a currency event here and abroad to be rather high in the next decade or two.