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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (11907)	9/27/2008 10:35:18 PM
From: axial	Read Replies (1) \| Respond to of 71454

"Is there a historical parallel to this?" Not sure which "this" you mean. There's a long history of comparable events: Eight hundred years of financial folly voxeu.org --- Vi quotes von Mises at the top of the thread: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. The breakdown appears as soon as the banks become frightened by the accelerated pace of the boom and begin to abstain from further credit expansion." -- Ludwig von Mises If you want to know more about the thinking behind the quote, go here: mises.org --- Beyond the concept of the business cycle delayed (normally every 5-7 years) we have expansion of credit, financial malfeasance, US insolvency, and unpredictable effects of derivative defaults, as banks freeze up. In the presence of loose credit and deregulation actors used risk reduction techniques that postponed reconciliation. In effect they extended the business cycle, worsening eventual effects. On the face of it, hedging risk is a viable proposition. However, it seems to have created risks of its own. By accident and design many players got into complex instruments which they didn't fully understand, and often weren't properly crafted in the first place. Counterparties often weren't required to have sufficient reserves to meet obligations, or ratings agencies mis-stated their ability to do so. Now, even creditworthy counterparties may find it difficult - or impossible - to meet their obligations. On Markets and Complexity technologyreview.com So yes, there are historical parallels, but this is potentially the biggest and worst combination of events ever seen. There's a very real possibility of uncontrollable cascades. Nobody knows how it will work out. JMO Jim