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

To: Gary Mohilner who wrote (14876)	11/23/2008 10:25:37 AM
From: Don Earl	4 Recommendations Read Replies (1) \| Respond to of 71475

The first problem is any program to cure a credit bubble by creating more credit is suicidal. More or looser credit isn't the solution, it's what got us into this mess in the first place. The mortgage fiasco is more due to people owing more on their homes than they can net in selling their home. If you sell a house, you can figure roughly 10% of the sale price will be chewed up in closing costs. Let's say for example, someone bought a house in 2006 for $500K with zero down, and it has since lost 20% of its market value. If that person sold the house today for $400K, they would net $360K after closing costs. In other words, they owe $140K more on the home than they can net in a sale. If that person loses their job, not only can't they make payments on the house, there's no incentive to keep it even if they could. The only way to fix the problem is to create new wealth that can be used to service existing debt. At a certain point, it's probably a little goofy trying to solve the world's problems on an Internet message board - sort of like middle aged guys with beer guts watching TV while discussing how the world's top athletes could play better football. Whatever. For mindless entertainment, it gives folks something to do. To fix a bursting wealth bubble, you need to build a bigger and better bubble - take something people have and make it worth more. My take is this could be done with gold. Create a global currency that is based on a gold standard, with a very high price of gold. The first step would be for central banks to go into the markets to break the gold exchanges. Buy up the paper, call in the leases and demand delivery of the physical. With the exchange vaults emptied, and the paper market wiped out, you'd have a panic that would drive prices through the roof - probably a few scandals as well. It wouldn't be too hard to create public opinion demanding that governments are the only ones that can be trusted to manage gold deposits. From there, the next step is a world gold certificate that can be swapped out for either paper money or physical - or the other way around, buy gold at a very high price with either paper money or world gold certificates. Ma and Pa could trade in their wedding bands to pay off the Visa and make the mortgage payments. The gold eagle grandpa bought is suddenly worth more than enough to buy a new Chevy. A kilogram bar is worth the price of a Beverly Hills mansion. Once the bubble is the right size, the central banks tie a knot in it and fix the price so the air never comes out. Windfall profits are deposited in under funded banks, used to buy things, and reinvested in beat up stocks and bonds. What the heck, if YHOO could go up 150 times in a few years, why not gold? $100,000 per ounce would probably do the trick and is no more absurd than anything else that happens in the markets.