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 : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: IngotWeTrust who wrote (11886)	9/27/2008 4:39:36 AM
From: dybdahl	Read Replies (2) \| Respond to of 71454

I am Scientifically and mathematically educated, and understand how harmful it can be, when so many people use less than the last 35 years as reference for economic decisions, or even worse, when a nation thinks that it wins wars because of intrinsic properties of its population. However, I have also seen so many information cascades (http://surl.dk/4rl/ ) already in my life, that I don't take any common wisdom for granted any more. The current crisis is obviously not a surprise, being on this board, but it is still important to estimate the size of this problem. Many people on this board switch between saying "We're doomed" and "In reality, it won't go that bad". This includes Vi. It is very human to do this, and we can start counting the number of "dooms" and "not doomed", and try to make our opinions based on a weighted average of these counts. I guess this is what most people do - but I prefer to dig deeper into the reasoning and the numbers. Vi seems extremely good at digging out numbers, finding essential information. That's not my strength - my strength is usually to apply methods from one science on another. As this discussion seems to confirm, some derivatives can blow up in non-destructive ways, some derivatives can easily be replaced by catalyst mechanisms, and then there are some derivatives which actually increase damage when a crisis hits. The main problems right now seem to be: * USA has consumed too much and produced too little (China is part of this, too) * USA has had too low taxes for too long * USA has significant war costs * Incorrect estimations of financial risk (sub prime etc., and I believe this is still happening) * The people in charge now, are those that went with the flow. These people need to be replaced. * Lack of knowledge about how to replace [risk rating] systems that failed (interbank problem) The first three will probably be addressed with a new president. Get rid of the wrong people requires some firing, some defaults etc. Incorrect estimation is probably improving a lot these days. But the last point is difficult: And that's where the central banks need to replace interbank money flows with money flows that go through the central bank. Vi adds that there is another problem: Hidden inflation. I don't fully agree on that one. There are several reasons: * Inflation numbers are always late, and they actually indicate increased inflation. * Even though there has been significant inflation on frequently purchased products, I see an extremely low inflation, probably even deflation, on expensive and rarely purchased products. * Inflation measurement is becoming increasingly difficult. Much of the improvement of living standards in Europe is about getting the same product, but with better environmental properties. People are willing to pay double price for the same size carrot if it's organic, and that's not inflation, but it can easily be measured as such. Also, the fact that one Harry Potter book could change the national inflation number in Norway is quite descriptive of what is wrong with inflation measurement. I wonder how much the Apple iPod has increased inflation?!? * If you compare 2003 with 2008, the price of really comparable products didn't increase for me. Furniture is half price, computers are probably 75% down, cars are the same, gasoline is up 30%, car service is down at least 30%, the same health care is much cheaper, hair dresser is the same, toys are much cheaper, the same food is the same price (but people buy more expensive food), travelling is much cheaper, but wages and house prices are significantly up. Ok - I don't live in USA. American consumers will feel that they can buy less in the coming years. That is not national or worldwide inflation, that is economical responsibility. It may be difficult to get the overview, when you live in a country that is in an economic mess, especially when so many things happen at the same time. But I think there is much more truth and information hidden behind the numbers that I see in the news and in this forum.