BS: The Crash of '08

Subject: BS: The Crash of '08
From: Slag
Date: 17 Oct 08 - 08:41 PM

So when the Market "Crashes" where does all that money go??? Somebody has to be making out like bandit(s)?

And as far as money goes, since the US left the world of "intrinsic value" which is to say the valuable metals backing the currency, it's only money if Uncle Sugar says it's money! What bearing does this have on the US and world markets? Is Uncle Sam's charade waering a little thin right now?

How long do we go on making believe?

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 17 Oct 08 - 09:55 PM

Almost all that money was never real in the first place, Slag. It vanished in an instant into the realms of imagination from whence it sprang.

All that is real is tangible stuff...and the intelligence, skills, and ability of the population. The price tag changes...reality remains the same....or it would if people weren't enthralled and enslaved by made-up money that isn't real and up to their eyeballs in debt based on spending the made-up money that wasn't real.

Is someone making out like bandits? You betcha! When prices crash those with disposable income buy in at a really LOW price and they get real stuff for their fake money. They later sell it for big bucks (more fake money) after things have taken a turn for the better...and that allows them to have more real stuff. And round it goes again.

Subject: RE: BS: The Crash of '08
From: Rapparee
Date: 17 Oct 08 - 10:02 PM

Money today is just electrons moving from computer to computer, 1s and 0s, bits and bytes.

Sure, Uncle Sugar still has all that gold in Ft. Knox (yes, it's really in there) but it's not nearly enough to put the US back on the gold standard (as Ron Paul would do).

Wealth is, ultimately, based upon the productivity of people and what constitutes wealth varies from culture to culture and even person to person. I feel wealthy because I'm not in want; you might only feel wealthy if you had six yachts and the trophy boys or girls to go with them.

Subject: RE: BS: The Crash of '08
From: Donuel
Date: 17 Oct 08 - 10:14 PM

There are a handfull of short sellers who made 100s of billions dollars in the last 90 days.

Not surprisingly due to the people involved in passing out the bail out, Goldman Sachs has made out very well.

Subject: RE: BS: The Crash of '08
From: CarolC
Date: 17 Oct 08 - 10:23 PM

Gold really has no intrinsic value anyway, except for when it's used in electronics and things like that.

Subject: RE: BS: The Crash of '08
From: Janie
Date: 17 Oct 08 - 10:55 PM

"This American Life broadcast an especially clear explanation of where the money is (was), how the increase in money led to an increased demand for more mortgages and the ridiculous loosening of lending criteriam and how mortgage backed securities got out of hand and precipitated the global financial melt down.

http://www.thisamericanlife.org/Radio_Episode.aspx?episode=355

This may not be the most appropriate thread to which to post this, but there are so many related threads, I really can't sort them out.

Subject: RE: BS: The Crash of '08
From: Janie
Date: 17 Oct 08 - 11:11 PM

Make that..."criteria".

(My OCD tendencies must be acting up for me to bother to post a correction:>)

Subject: RE: BS: The Crash of '08
From: akenaton
Date: 18 Oct 08 - 03:41 AM

Like Hawk says...the money is fake, but before long the effect of that vanishing money will be felt by every one of us.

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 05:04 AM

I wouldn't agree that gold has no real value, Carol, except in this sense: you can't eat it.

The reason that gold has been highly valued since the most ancient times is:

1. It doesn't tarnish! It completely defies the ravages of time. No other natural metal can do that. Gold is symbolic, in fact, of immortality for that very reason.

2. It's highly workable, thus is ideal for making fine jewelry, etc.

3. It looks very beautiful.

4. It's relatively rare and hard to acquire...it takes a lot of work to recover gold from the earth.

Anything that possessed those 4 qualities would be seen as highly valuable and desirable in any moderately developed culture, and that's why gold has always been so sought after and valued.

Ron Paul is quite correct that money should be based on (backed up by) real things that it can be redeemed for such as gold and silver, for example. If it was (as it once was), it would still be real money.

*****

Rapaire, I found this statement of yours quite striking: "I feel wealthy because I'm not in want; you might only feel wealthy if you had six yachts and the trophy boys or girls to go with them."

Dead right! I feel wealthy if I have enough of what I actually need to survive decently (car, clothes, food), and an okay place to live in, and one good guitar, and still enough money left over to have a little fun, go to a restaurant, see a movie, that sort of thing.

On the other hand, my Dad only felt wealthy if he had a Mercedes, a Jaguar, a Porsche, a Japanese minivan, an airplane, a sailboat, a big powerboat, a huge house on the waterfront with a dock, and considerably more money than 95% of the other people in his community. That was "wealthy" to my Dad, and it was what he sought all his life. At a couple of points he had as much as 2/3 of the above list at any one time, but he never got it all, and it never lasted when he did get it.

He spent his whole life chasing that rainbow...never caught it.

Subject: RE: BS: The Crash of '08
From: Rapparee
Date: 18 Oct 08 - 08:11 AM

Well, having been poor (and mean getting-leftovers-from-the-nuns-for-dinner poor) when growing up my idea of wealth might be different from that of others. It affected my ideas of heroism, of wealth, of security, of politics, of money management, of education, of "patriotism" -- of my whole life.

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 08:18 AM

I bet. Nothing strengthens people like adversity. Over-protect a child/adolescent and you simply render that individual into someone who eventually grows into an adult who can't cope with reality. God knows, I've seen a bellyfull of what results when that happens, and it's tragic, but I shall name no names.

Subject: RE: BS: The Crash of '08
From: Amos
Date: 18 Oct 08 - 09:06 AM

The Big Q for me is how hard the crash will end up being, how long and deep.

Things dry up--jobs are disappearing in small companies all over the country, and houses are drifting away from their people. A lot of stress, and some real threats, are running in the streets.

A

Subject: RE: BS: The Crash of '08
From: Amos
Date: 18 Oct 08 - 09:30 AM

Real stories. Real pain. from Bob HErbert.

Subject: RE: BS: The Crash of '08
From: Donuel
Date: 18 Oct 08 - 10:56 AM

For those fortunate enough to have had money that unfortunately has been diminished by half, some of them can sue for money damages.

If your loss resulted from misinformation or out right fraud you can sue and recover a fraction of your losses. After lawyer fees one might not see an advantage in sueing. If you have a money market ffund with 10 different stocks there is even less likelyhood of recovering losses. IF it was just one stock like Lehman Bros you are out of luck since they are banckrupt but Merrill Lynch still exists as a subsidery of Bank of America so if you could probe intentional fraud you have a chance of winning a legal action.

Otherwise its just the risk of the game.

Having bought a house for cash I am looking at a devaluation of about $100,000 or more and have no legal recourse. I knew at the time I was buying in a bubble market but nor did I want to deprive my wife and kids of a home with a playful back yard during an age when they could most enjoy it.

Subject: RE: BS: The Crash of '08
From: Slag
Date: 18 Oct 08 - 04:56 PM

Vaporware=US$! Econ.101.

Yes, gold DOES have an intrinsic and a historic value which transcends time and cultures. The technical value LH enumerated and although "beauty is in the eye of the beholder" there is a vast consensus that gold is a beautiful thing.

And silver has similar qualities. This has been discussed in other threads but the "commodity" of heavy metals was not my real point.

McCain pronounced that the basic economy in the US was sound---then the bottom fell out of the market the world around. I believe that he was 100% correct in his pronouncement. America still has a motivated and able work force and we have resources and ingenuity to create products for which there is (or will be) a demand. We can perform services that are needed and desired by great numbers of people. You don't have to reflect long to see this is true,

So, where did the let down come from? Seems to me it is a combination of greed and corruption and complicity from the highest ranks: corporate management and Washington, particularly Congress. What has our Chief Executive done? What is he doing? Are there investigations? Is wide scale prosecutions in the offing? To this Mr. Bush says "Huh?" and "What? Me worry?" Alfred E. Neuman couldn't have said it better.

Cal Coolidge nailed it when he pithily said "The business of America is business." Our "commodity" are the positive attributes that LH, I and others have already pointed to. The thing that fluctuates so wildly is the Dollar. If anything the Dollar should be the most stable element in play: IT IS THE MEDIATOR OF ECONOMIC TRANSACTIONS. If the "faith" is lost on the "fiat" medium then it really says something about the ones who make the pronouncement "Let it be cash." GW has the lowest rating of any President in recent memory and he is only eclipsed by Congress's lower rating.

The money SHOULD be good though because look who we are voting for, two millionaires, two Senators. More of the same from both side. To me "both" sides look like "one" side on the "inside" with "We, the People" on the "outside". America was a good idea. Maybe history will show where it was betrayed.

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 06:53 PM

I'm sure history will have much to say about it.

The dollar never should have been taken off the gold and silver standard. When they did that they turned the dollar into nothing but an empty promise...and you can't trust a promise from people (politicians) who so frequently have been known to break their promises.

Subject: RE: BS: The Crash of '08
From: Bobert
Date: 18 Oct 08 - 07:00 PM

Tieing the value of currency to gold or silver makes no sense at all... It's no better than beads that were used to entice Manhatten Island away from the Indegigenous folks...

Actually, yeah, I've wondered where the money has gone but that isn't the real question here...

GNP isn't about how many dollars there are in existence but how many times they turn over every year, i.e. spent and respent and respent... That is what is not occuring... Well, not in this country, that is... Herein lies the problem... They are being taken out of ciruclation because they are going overseas...

That is the crux of the currency problem, pure an' simple...

B~

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 07:24 PM

It makes a great deal of sense, Bobert, because gold and silver are real and their amount (in government reserves) can therefore be estabished and confirmed...and if dollars are tied to specific amounts of gold and silver (example: gold was for a very long time worth $24 per ounce)...then you cannot artificially enlarge the money supply beyond all reason just by saying it's there (which it isn't).

To not tie dollars to something real and tangible is to turn the money supply into a giant pyramid scheme, and that's exactly what has been done.

Pyramid schemes always collapse at some point, because they are not based on reality.

Let me explain this another way: a piece of paper money is a receipt. It's worth nothing in itself, it's a receipt given on behalf of something that is worth something that backs it up. The way paper money began was that the goldsmith's were storing people's gold and silver coins in protected vaults with armed guards on duty. People would come to take out some of their coins when they needed to do some spending...but bags of coins are heavy and burdensome to carry around...so the goldsmiths starting offering pieces of paper as loans, certificates that supposedly symbolized some of the gold the person had on deposit in the vault, and you could use those certificates to purchase things in lieu of the real gold. The goldsmiths charged a fee storing your money and they charged interest when lending...so if they could lend out 10 times the money they really had on deposit, THINK of what that means in profits to the goldsmith! It exponentially increases the overall money supply and stimulates business and trade, and all the goldsmiths benefit as the many loans get deposited here and there to various goldsmiths.

They soon discovered that it was safe enough to lend out one hell of a lot more certificates than they really had gold to back them up with, because there was little danger of ALL the depositors arriving en masse one day and demanding their gold.

This made the goldsmiths very rich, and it was the beginning of phony paper money, created in vast amounts (through lending paper certificates) with only a fraction of the stated value in real money to back up the many loans.

On the rare occasions when the depositors did panic and descend on a particular goldsmith and demand all their gold and silver back...and discovered that most of it wasn't there (because most of it had been created out of thin air by lending), there was a riot, and the enraged people sometimes ended up hanging the goldsmith or burning him at the stake.

Ah...those were the times for direct social action, weren't they? ;-)

Subject: RE: BS: The Crash of '08
From: Amos
Date: 18 Oct 08 - 08:18 PM

Those were the times for an end-bracket with slash-I in it to close the italics container. When you fail to close an italics container you ruin the economy because of the huge number of illegal emphases you allow into the country.


A

Subject: RE: BS: The Crash of '08
From: Bobert
Date: 18 Oct 08 - 08:31 PM

So is dog poop, LH... No, gold and silver have little real value other than what people artifically assign to them... Just because they are scarce doesn't mean that we should be assignin' value to them... Eastern box turtles are scarce, too... Why not tie currency value to them???

This is about the most archaic argument that has ever been perpertrated on mankind... It is primative... Why not bones???

This is a modern world and currency is as artifical as anything that can back it, be it turtles of gold... Currency has at it's source trust... Gold doesn't change that... One country could have all the gold and guess what??? Ya' give... Not be worth a plug nickle unless mankind assigns value to gold...

Come on, LH... You know better than to expose very old school economics... Time to get in the Nova and drive it over the bridge into the modern world...

I love ya'z brother but you are need to re-examine some stuff that no longer makes sense and a gold standard is one of them...

That dog not only don't hunt but it's been dead an' gone for decades and diggin' it's bones up and tellin' them to go hunt ain't gonna get it...

B~

Subject: RE: BS: The Crash of '08
From: Slag
Date: 18 Oct 08 - 09:29 PM

Bobert, I think if you go back and look at my second post you will see in all caps that the money, be it gold or paper or some other form ( I actually have little copper "boats" from Vietnam that indicated that the giver had an actual boat that it represented) that it MEDIATED the exchange of goods and services. The real crux is that it is an AGREED upon medium of exchange.

The problems arise when third and fourth parties get involved and begin to manipulate the value of the medium. Counterfeit is illegal for this reason. Hoarding, amassing, cornering, monopolizing, pyramids, almost an endless list represents attacks against and attempts to steal the medium. If that goes unchecked we revert to barter, as the medium cannot be trusted. I'll give you one gallon of milk for two gallons of gasoline. What? Not fair? Let's dicker. That represents ground zero in economics.

Subject: RE: BS: The Crash of '08
From: Rapparee
Date: 18 Oct 08 - 09:35 PM

Because you cannot touch the basis for a currency doesn't make that currency any less real OR valuable.

Actually, gold is literally everywhere. So are osmium, palladium, silver, platinum, iron, radium, thorium, and uranium. Just not in quantities sufficient to make their extraction worthwhile.

Diamonds are artificially expensive, to use one example, because De Beers and the Diamond Market keeps them that way (ask yourself about the Northwest Territories diamonds and ones from South America or, for that matter, Arkansas or Montana). Forbidding private ownership of gold, as Roosevelt did, is silly. Tying the value of a country's currency to an artificial value is as silly as tying it to an artificial anything.

And runs on banks were not by any stretch of imagination rare events!

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 09:49 PM

Okay, Bobert...so I'm gonna arrange for a bunch of gold and silver...and a bunch of dog poop...to be delivered to you tomorrow and spread on your lawn in 3 separate piles...and you have 15 minutes to gather up which of it you want or ignore it all before it's carted away again... ;-) 15 minutes, Bobert! That clock is ticking, Bobert! Better decide which one of them piles you want before they ALL disappear! Will it be gold? Will it be silver? Will it be dog shit?

Then we'll see what's valuable and what is not, won't we? This ain't rocket science.

You're the one livin' in a fantasy world, old buddy. Money has got to be based on a real standard or it ain't hardly worth the paper it's printed on.

The only reason people are pretending the paper money and digital money we have RIGHT now is REAL is because we'd all be in very deep shit immediately if we stopped pretending it was! We'd all be financially bankrupt. Everything would grind to a halt, and no one would know what to do. You'd have anarchy, total disorder, and the government would need to declare martial law and put troops on every street corner, and a lot of people would get shot.

****

Eastern box turtles? A cool idea...but just not practical. They move around too much, they poop, you gotta feed 'em and provide habitat or they die... Nope. That dog don't hunt, Bobert. I'm stickin' with gold and silver. It just sits there, looks pretty, never complains, and it don't need feedin'.

Subject: RE: BS: The Crash of '08
From: Rapparee
Date: 18 Oct 08 - 10:09 PM

Ah, but the gold and silver is valuable only because people have long agreed that it was valuable. And it is valuable because it was difficult to extract, which means that the ACTUAL value comes from the labor needed to extract it.

Labor, the sweat of the brow, is the basis of all economies. We reap the whirlwind (as we are now) when we forget that.

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 10:24 PM

Yes, that's right...and the money is likewise valuable only because people have long agreed that it was valuable. But it is a mere idea...a symbolic concept...unlike gold and silver which are real.

I agree that it's arbitrary (to some extent) to define gold and silver as "valuable", but they are real. Money isn't. It's a symbol of something that is real (labor).

Money is symbolic "work" that you can hold in your hand....work not yet done. You give it to someone who values it, and they then will do the work for you or they will trade you the results of the work for the money.

Imagine if you could create a huge amount of money at the tap of a computer key, millions of dollars worth, and lend it out to various people, and collect interest on it.

That's what the banks have been doing. That's a money tree, and it's a pyramid scheme. It can collapse, though, if enough of the debtors are simultaneously unable to pay off their debts.

Then the unreality of the magically created money that appeared out of thin air becomes clear, and the Ponzi scheme collapses.

Subject: RE: BS: The Crash of '08
From: The Fooles Troupe
Date: 18 Oct 08 - 10:27 PM

Dog poop, turtles, what about White Elephants...

Subject: RE: BS: The Crash of '08
From: Little Hawk
Date: 18 Oct 08 - 10:31 PM

White Elephants have always had tremendous value in Asia, but you can't put an elephant in your wallet, and they are expensive to house and care for. Again, gold and silver are way better. So is platinum.

The Amerindians of the western plains had their own favorite form of money: horses

That made perfect sense, given the lifestyle they were living at the time. A man with many horses was a wealthy man.

Subject: RE: BS: The Crash of '08
From: Rapparee
Date: 18 Oct 08 - 10:40 PM

I'd rather have wheat, maize, oats, barley, quinona, rice.... Try eating gold when there's a REAL famine -- there have been times when gold couldn't buy you a handful of grain and I fear that there will be again.

Pre-alphabetic cultures used tokens to indicate quantity and so on: a token with a V on it might mean a given quantity of grain; three such tokens indicated 3 such quantities. You could then exchange 3 V-tokens for one horse, or whatever. One BIG problem, given that the tokens were made of baked clay or carved stones, was counterfeiting. This was "solved" by stamping metal disks, the precursor of coinage. Eventually the "tokens" were discontinued and tallies pressed by a chisel into wet clay tablets, where were then allowed to harden naturally or in an oven (cuneiform). And from there writing developed...and libraries, which were actually repositories for accounting and tax documents.

The farmer is the man....

Subject: RE: BS: The Crash of '08
From: Amos
Date: 18 Oct 08 - 10:54 PM

Money is an idea supported by confidence. The reason gold, at one time, was the ultimate repository of confidence is that it was hard to adulterate and you couldn't mess with it.

Money is still an idea backed by confidence, now that the gold window has long since closed.

Humans will work for money to the degree they have confidence that it will pay for other work and things.

Gold-basing the economy would certainly stabilize confidence, but it would be illiquid and hard to dampen up and down. It would make the flows of credit now so popular between banks and government very tricky to manage. Not that that would be bad in some respects but it would undermine the broad middle class growth of the last fifty years.


A

Subject: RE: BS: The Crash of '08
From: The Fooles Troupe
Date: 18 Oct 08 - 11:00 PM

"undermine the broad middle class growth of the last fifty years"

So ------ I'm being told that the current pile of dog doodoo that we are in was not caused by the system being undermined by greed based on thin air fiat currency?

Subject: RE: BS: The Crash of '08
From: Amos
Date: 18 Oct 08 - 11:06 PM

It was caused by greed based on conscience-free, ethics-free opportunism.

A

Subject: RE: BS: The Crash of '08
From: The Fooles Troupe
Date: 18 Oct 08 - 11:26 PM

"caused by greed based on conscience-free, ethics-free opportunism"

... trading things for profit (to the greedy gullible) whose alleged value was (with 20-20 hindsight) based on thin air, nothing one could hold in one's hand.... of course, we know know just WHAT they were holding in their hands....

Subject: RE: BS: The Crash of '08
From: Slag
Date: 18 Oct 08 - 11:28 PM

I know I've hit this chord before but LH! I have to go you one further. Money is a unitized APPRECIATION of labor/possessions. Think of it. How much are you intrigued by the new Game Boy machine? That Cabbage Patch baby? The work done by your local Garage mechanic? How much are you willing to pay the Bully Boys for their protection racket? You know, so they won't haul you off to prison for non-payment of taxes?

Economy is a corral polyp siphoning off plankton as it drifts by. That polyp and its billions of brothers or sisters, as the case may be, sharing wealth or dearth, building on the same reef, all sharing the vicissitudes of current and life. I've always enjoyed fishing. You hang a flashy dangely bauble with a hook in it (currency equated to free lunch) and pass it before some lurking monster and BANG! It's like found gold! You have a meal and you've had the sport of fighting him in! Econ. 101! No, it isn't a non sequitur, just a few ellipses so you can fill in the blanks, class.