November 07, 2007

And then Bernanke's dream was realized, and the US dollar died today

UPDATE: HOLY CRAP - DOLLAR IN FREEFALL, GOLD SURGING TO $850 AN OUNCE, THE UNITED STATES IS LOOKING LIKE ARGENTINA RIGHT ABOUT NOW.

THE WORLD HAS LOST TRUST IN THE US DOLLAR. THE CON IS OVER.

``The world's currency structure has changed; the dollar is losing its status as the world currency,'' Xu Jian, People's Bank of China, November 2007

LONDON (MarketWatch) -- The U.S. dollar stumbled to new lows on Wednesday after a top Chinese official called for the country to shift more of its huge foreign exchange stockpiles out of the beleaguered greenback.

Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, was quoted by wire services as saying China should shift more of its $1.43 trillion of currency reserves into "stronger currencies," such as the euro, to offset "weak" currencies like the dollar.

He also said a rapid appreciation of the yuan is not necessarily the right move -- as Washington and increasingly Europe are requesting -- though Cheng insisted the country wasn't actively seeking a major trade surplus.

The reports sent the beleaguered dollar to new lows against the euro, with the shared currency surging as high as $1.4703 from $1.4559 late Tuesday.

72 comments:

seifried said...

*
*
*
*
*
*
*
I saw this coming and renegotiated my contracts when the Canadian dollar was at 68 cents (after the good old days of 63 cents I figured a 7% pay cut was enough). Most people I know have also renegotiated any US contracts to be paid either in Euros or Canadian dollars, anyone who hasn't yet, man I feel bad for them.

Anonymous said...

Wow, the dollar is getting bitch slapped by every single currency. Hey Keith, 26 year record low against the Sterling today...you must be a millionaire to afford London at theses levels.

I remember when my business took a huge hit in 98 during the Russia/Mexico fiasco, in which I had many export contracts set before it blew up.

Dow Futures are now down 150 points. Start the presses PPT because it will be ugly today.

Andrew from Russia said...

Now that was a dive! Hell, where's the airsick bag?

u4yeah4 said...

It terrible to watch a great country's legacy squandered by the stewardship of men who were never worthy of leading it.

Anonymous said...

HAPPY SHTF DAY TO ALL!!!

Man! I didn't expect it this fast.
It'll be all I can do to get my chores done and not sit and watch the mayhem.

Anonymous said...

LONDON (MarketWatch) - U.S. stock futures were pummeled on Wednesday, with oil futures nearing the $100-a-barrel landmark ahead of key inventory data, the dollar skidding after a top Chinese official called for his country to diversify the country's trillion-dollar-plus currency stash and General Motors taking a massive $39 billion charge.
S&P 500 futures fell 17.1 points at 1,507.90 and Nasdaq 100 futures dropped 18.75 points at 2,214.75. Futures on the Dow Jones Industrial Average lost 128 points.

Paul E. Math said...

I wonder what Mike Norman has to say about this. Talk about yer dopes.

nnj said...

Mike Norman has been busy balancing my checkbook...for a couple of days now.

Anonymous said...

Look for the CFL to buyout the NFL and put Bush in charge as a thank you. Americans will be stunned.

Roccman said...

Yeah baby!!!!

Go Morgans!!!!

Rembember class when I told you to buy food, ammo, and bury a bunker...??

Who did (besides me of course)?

Oh well...

You remember when I said your government gives two shits about you and has defined you as a useless eater?

Oh well...

Remember when I said oil WAS GOING TO (did in 2006) peak...

Oh well...

Remember when I told you the housing crash was not even a zit on the face of life...

Oh well...

Now listen very closely class...because what I am about to remind you is grim, but you still have time...

Remember that die off thing...you know the thing where 90% of the human species dies by 2020?

Well go here:

www.dieoff.com

Then prepare - the best you can...

It's all fun and games till someone gets hurt...

Oh fucking well...that's life...and that is just the way it goes.

Anonymous said...

Gold was at $850 in 1980 as well. We all know how well that investment turned out over the next 25 years.

The $US was worth less than the canuck buck in the 1970s as well. We all know how that workd out over the next 30 years.

So yeah the dollar is low now and gold is soaring. It's happened before. It was temporary then. It is temporary now.

Oh and adjused for inflation oil was at $103 in 1979. And it was at $10 in 1999.

The more things change the more they stay the same. You can freak out or you can just gow with the flow and stop worrying so much. I choose the latter.

Anonymous said...

Enough already with this housing/stock market stuff!

Anyone watch last night's episode of "The Real Housewives of Orange County"?

why did God make idiots? said...

Yea? Well in 1999, I was making $16.50 per hour.

Today in 2007, I HAVE NO FVCKING JOB. $0 NOTHING.

Any more wisdom as*wipe?

Anonymous said...

Another blogger over at Bloodhound is "getting it" and Swann is still in denial. The silly man will NEVER EVER admit he was wrong.

======================



The Guy Down At The Car Wash Gets It…
By: Doug Quance, BrokersFirstRealty.com, Post Archive, RSS Feed
Posted: Tuesday, November 6th, 2007, 9:58 am MST
Category: General, Real Estate, Realty Reality

There’s a lesson in all this, I promise you

In a transitional part of Atlanta, there now stands a brand spankin’ new car wash. It used to be a Burger King, but that closed years ago… and after demolition, this lot sat vacant for several years.

Fast forward a few years, and a sign went up announcing the construction of the car wash. That sign was up for at least a year in advance of the car wash actually being built… so on this busy street - there was NO question that EVERYONE in the area knew a car wash was coming.

So a few weeks ago, they opened for business - all bright and shiny - and offered a grand opening special of $5.99 to wash a car. They had a guy holding the sign out at the street to make sure everyone knew they were open and that a car wash was only $5.99.

Then, the following week, the sign guy was still out on the street - waving the public in - but this time, his sign stated “$4.99″ - instead of the previous week’s “$5.99″. Hmm… maybe they’re making it up on volume, who knows?

Another week goes by, and now the sign guy is holding a sign stating “$3.99″. Do you see a pattern here? Good. You’re paying attention. Because there is one.

The car wash still does not really have any customers that I can see. And I’d be willing to guess that the owners are starting to panic. After all, they probably spent a million dollars building this place.

So here’s my analysis and how it relates to real estate:

The car wash owners obviously realized that the market did not accept their initial price - no matter how much promotion they had done… and they responded with price adjustments.

Home sellers should take note of this market economics fundamental.

However, what the car wash owners have failed to realize is that two miles down the road is a well-established car wash that has been there for over ten years… and they have a $3.00 car wash. So - unless they add more value to their proposition - the public will continue to reject their offer.

And home sellers should not miss this message, either.

As long as your home does not compete in the marketplace, you will not get any takers. And why should you? There’s a ton of competition out there.

So it will be interesting to see what the car wash owners are going to do next. I am sure that they feel like they “need” to get a certain price (just like some home sellers) but whether or not the market agrees with that price is another thing.

So maybe the guy down at the car wash gets it…

Or maybe not.

Anonymous said...

In 1980 Gold was at $2000 adjusted for inflation, not $800. We still have a long ways to go.

Mark in San Diego said...

Forget HOUSING PANIC. . .This is PANIC!!!!. . .buying a cheap house, and the subprime problems will be the LEAST of our worries going forward. . .this is it - the Chinese landlords have called on Ben to raise rates OR ELSE!!!. . .game over Ben.

Michael said...

Believe it or not, if Bernanke wants to help the housing market, he needs to RAISE the FF rate, not lower it. If you look at market action on the rate cuts (and back through the Greenspan rate hikes), the long end of the curve has been moving inversely to the short term actions. The market is adjusting its inflation expectations accordingly. Mortgage rates follow the long end.

Bernanke is trying to keep the credit markets functioning and he'll worry about inflation and the housing market later.

Batman said...

Frightening freefalls Batman, the currency is looking for some legs to stand on but there is no good news out there. Wait until bank failures start hitting... the iceberg under there is pretty damn big by my reckoning.

Budvar said...

"Gold was at $850 in 1980 as well. We all know how well that investment turned out over the next 25 years."

No shit Sherlock, it took interest rates of 18% to stop the rise of gold, $30k bought a house, America had savings and a manufacturing base.

You see any of the above coming back anytime soon?

Anonymous said...

China isn't actively seeking a trade surplus? uh huh, right.

bryce in canada (Vncvr & Clgry bubbls) said...

At this instant, for US$941.57, you can buy an ounce of gold and a barrel of oil

Or, if you prefer, for CAD$863.62 [1 CAD = 1.09071 USD]

In CAD$ terms, this is a 4% increase from Sept. 28, when the cost was US$833.75 (which was also approx CAD$833.75; parity-day)

Anonymous said...

The SILVER market is incredibly RIGGED by the silver shorts. This is well documented by Ted Butler and today action can leave no doubt about it. Gold up 10$/oz. Silver up about 1 cent...that is not right. The best thing you can do is buy physical silver...inflation adjusted it should already be well over 25$/oz.

Anonymous said...

Gold was at $850 in 1980 as well. We all know how well that investment turned out over the next 25 years.

The $US was worth less than the canuck buck in the 1970s as well. We all know how that workd out over the next 30 years.


D'oh! In 1980, new oil started flowing from Alaska, the UK and Norway, and the Saudis wuved Reagan---godless Commies were their enemy then and the Saudis & US wanted to bankrupt the USSR with Islamic terrorism and financial ruin. The oil flowed, the oil-exporting USSR went under.

There ain't any new North Seas left. That's it. We're nearly tapped out---any new discoveries are so far and expensive and hard to extract that they can't make up for the decline in all the other mature oil fields.

In Texas, the oil price went up 1000% during the 1970's. They were cocky and confident. But geology won, and production was STILL lower in 80's despite drilling like crazy.

And it's still going down.

You can't flash American pesos to Mother Nature and expect the oil to gush out.

Anonymous said...

budvar you are a simpleton

Anonymous said...

In 1980 gold was roughly equal to the dow jones average. Both in the 800 to 900 range.

27 years later who did better? Someone who bought gold or someone who invested in stocks? The dow is at 13,500. Gold is still in the 800 to 900 range.

So you gold-bugs go ahead and load up on gold. We'll talk in 2030 and compare returns.

Anonymous said...

There ain't any new North Seas left. That's it. We're nearly tapped out---any new discoveries are so far and expensive and hard to extract that they can't make up for the decline in all the other mature oil fields.

======

ANWR? Alberta? Shale Oil in Colorado? Plenty of new oil sourece out there. It may take $125 oil but eventually they will be gotten to despite the enviro-nazi opposition.

This "peak oil" argument has been going on since 1950. And every decade or so a new, huge deposit is found and the myth is debunked.

Now be a good little dommer and gloomer and go donate another $100 to Ron Paul, the kind of Doom.

Anonymous said...

It amazes me that this is never in the news. I mention it and people have no idea what I am talking about.

borkafatty said...

I love the smell of napalm for breakfast.

Yup things are going just fine...I have to ask...

Is the Fat Lady Singing yet?

Anonymous said...

Hmm stocks or gold, stocks or gold?

I can buy stock in a company, which uses that money to fund new ventures to produce new products or services to benefit all of us, eventually earning a return on my investment when the company makes a profit, or I can buy a few ounces of gold and watch them sit there being pretty.

drill collar said...

"This "peak oil" argument has been going on since 1950. And every decade or so a new, huge deposit is found and the myth is debunked."

Sure, that's why the U.S. changed from the world's largest oil exporter to the largest importer over a period of 40 years. I worked as a scientist for Schlumberger in the late '70s & early '80s. Even then the geologists were fully aware that oil resources were going to dwindle and new deposits would be more difficult to find and more expensive to extract.

Oil shale and tar sands require vast amounts of energy and water for extraction. They may serve as an expensive substitute for depleted crude oil but the cost is going to be far higher than $100/bbl. And we are 10-15 years away from any practical process for extracting shale oil in meaningful quantities. What happens in the interim?

So go ahead and discount the idea of peak oil. The market certainly hasn't.

King of the Bitter Renters said...

Wake up and smell the CIVIL WAR!

Its coming.

Anonymous said...

HAD READ THAT THERE WAS 300 YEARS WORTH OF COAL READY TO BE CONVERTED TO GASOLINE.... THEN PERHAPS THE PROPAGANDAISTS SAID 15 YEARS AND SHORTAGE RAPE PAYMENTS AGAIN FOR THE NEO OILS.....WHATS A SHEEPLE TO BELEIVE BUT TO SEE THAT THEY ARE GOING BROKE.......

Anonymous said...

ANWR? Alberta? Shale Oil in Colorado? Plenty of new oil sourece out there. It may take $125 oil but eventually they will be gotten to despite the enviro-nazi opposition.

Nope... Alberta is actually decreasing production. Because of the oil boom, house prices soared from <100K to over 300K within a couple of years.

The result is that it is harder to attract people at the old rates. Whereas before the salary might be $20/hr, with increasing house prices, income taxes, property taxes, food prices, etc. Today they need to pay those same workers $60/hr or more.

And keep in mind that in places like Fort McMurray - when you wake up and go for some fresh air - the whole town smells like tar because... guess waht... it is so close to the TAR sands mining operation.

Not really a great place to raise kids... which is why most of the skilled labour finds they can have a better life for cheaper elsewhere.

Keep in mind that this is mostly a MINING operation. There are not too many wells in the tar sands region. It is very expensive to get oil out. You need to spend a barrel of oil worth of energy to get a barrel and a half back.

They wanted to switch to using nuclear power plants to produce the steam - which is essential for prying the oil/tar free from the sand. The Canadian government nixed that idea. So today they are using mostly natural gas to convert water to steam.

End result - oil companies are making less because of rising costs due to workers salary increases. Even though the price of oil goes up.

At some point, it becomes a question whether it is more profitable to sell the natural gas rather than try making oil from tar.

Have a nice day.

Budvar said...

Anonywuss said..
"budvar you are a simpleton"

I'm not too sure whether you're trying to pass me a complement or not here, as a "Simpleton" has to be a step up for you, and something you so obviously aspire to.

Now we've got the petty insults out the way, are you saying that in 1980 interest rates were not in fact 18%, houses were not about $30k or that America didn't have both a manufacturing and savings base?

If so, care to back it up?

Anonymous said...

the central bank is full of friggin eeediots! guess that's what happens when you have soviet style central "planning"

Anonymous said...

Hmm stocks or gold, stocks or gold?

They have already found that an ounce of gold today can buy pretty much the same as during Roman times.

So... you could actually go much further back and realize that gold hasn't changed in over 2000 years.

But then... most paper money or stock in the last 2000 years has dissappeared.

Do you have any confederate dollars? Any stocks in the East India Trading Company?

Gold is just a hedge against inflation. As stocks and money go up and down - gold (just as steel, copper, silver, platinum, uranium, helium, oxygen, oil, wood, propane or any other material or gas) will retain its value because... it is what it is. It doesn't change depending on the whims of bankers and politicians.

By all means - if you feel like gambling and have money to spare - then invest. But if you were smart... you'd at least get a hedge (10-20% of your current value in something real like silver, gold, platinum, whatever) to protect you from the inevitable... that the economy WILL one day crash.

Don't you think it would be nice to have something real instead of bills printed by a runaway press?

Don't you think people in the confederate states wished they had some gold when their confederate dollars turned worthless?

Have a nice day.

Anonymous said...

Gold and Silver will climb in the short term. Speculators and inflation worriers will drive that climb. It will turn into a gold bubble (which will eventually crash). However, in the short term, my call is Gold $1600 1 year from now. The only question is will it be 800 euro or 1600 Euro at that time.

I think moving to the Euro short term is OK. But long term it is just like going to the next higher point on the Titantic. The housing bubble is alive and well in Europe. It will hit them too. The banks will react. In addition, the manufacturing base will be getting killed. For example, the currency locks that Germany has are expiring this year. They will see less cars in the US when the Benz costs 50% more in USD. The Germans will clamour for relief. They can't deal with that high of a Euro when the US is a key importer and can't afford the cars.

michael said...

new name for the u. s. currency:

the fubar.

hurin said...

"ANWR? Alberta? Shale Oil in Colorado? Plenty of new oil sourece out there. It may take $125 oil but eventually they will be gotten to despite the enviro-nazi opposition."

ANWP is peanuts, shale oil will come to a complete halt as soon as they run out of NG, shale oil is not oil and turning it into oil requires massive amounts of energy and water, where will they get the water? The Colorado river? I don't think so.
Also your price tag of $125 ignores the energy component in oil exploration. In basic terms it means, that as oil becomes more expensive it also becomes more expensive to drill for it.

"This "peak oil" argument has been going on since 1950. And every decade or so a new, huge deposit is found and the myth is debunked."

You are poorly informed. The man who first made the argument back in 1956, Ron Hubbard, predicted a lower 48 peak in the early 1970s and was right on the money.
Later in 1974 he made a prediction for a 1995 world peak, but as it turned out, the OPEC embargo, the fall of the shah of Iran, and the Iran-Iraq war ended up postponing this event 10 years.

Anonymous said...

GOLD TO DA MOON ALICE!!!!!

kitchenstove said...

Would it be an understatment to say we're in deep s--t?

Andrew Hac said...

Well, to all of you nitwits whom voted for SHRUB the 1st term and the 2nd term. I have one word for you: BRAVO !

You reap what you sow.

Americano ! What a stupid people !!!

Anonymous said...

Ron Hubbard...as in the guy who founded Scientology...that's who you mororns take your advice from? OMG you are more insane than I thought.

Vita said...

Ron Paul's monetary policy stimulated an interesting overview of the current-account shift underway and the history of the gold standard at:

http://frum.nationalreview.com

f'ed said...

The S&P 500 is roughly 9 points above the 1490 level, which is viewed by technical traders as a key area of support. Given the negative tone of today's trading, it stands to reason that we may see another retest of the 1490 area, which will invite some interesting trading action.
-yahoo finance

Anonymous said...

The gold-bugs are sillier than ever. Point out the fact that stocks have outperformed gold by a factor of 15:1 over the past 3 decades and they talk about Confederate money.

OK fine you win. Gold has doen better than Confederate money.

Anonymous said...

The gold standard will come back about the same time Jesus will.

Anonymous said...

Hey vita, I read that as well and it is about as good a rebuttal to the gold standard as I have read in a while. Also makes Ron Paul once again look like a fool with his simplistic views.

Anonymous said...

Wouldn't that be sinister as hell, if the planned demise of the dollar was economic warfare that everyone thought was bad decision making. China and its 1.43 Trillion is HEMORAGING cash. Wow.

keith said...

The DOW is now down 18% for the year in gold terms, down 2% in Euro terms, even though the sheeple thinks they're up 12% as they're mistakenly looking at it in dollar terms.

Classic mistake to make when in the early days of hyperinflation or currency devaluation

f'ed said...

anon 6:32-

time for Peter Schiff's lesson on the dow illusion:

http://youtube.com/watch?v=mE0IAhjEstk

Anonymous said...

Actually, I think that a one dollar bill issued by any of the Confedreate States is worth substantially more than a nice, crisp, new USD.

Anonymous said...

anon said
Ron Hubbard...as in the guy who founded Scientology...that's who you mororns take your advice from? OMG you are more insane than I thought.

__________________________________

His name is "Hubbert". It's a different guy than the one who did Battlefield Earth.

Here's the wikipedia listing listing about Hubbert's Peak

http://en.wikipedia.org/wiki/Peak_oil

You are ignorant and sad.

Jymkata

Anonymous said...

OK fine you win. Gold has doen better than Confederate money.

You completely missed the point - go read my post again.

Use gold as a hedge bet - but DONT put everything in gold.

If you have extra cash - put a part of it 10-20% in gold (or silver, or anything) which is real.

Money isn't real. Stocks aren't real. They can go belly up like Confederate money or Enron stock.

As the saying goes - only an idiot puts all of his eggs in one basket.

Are you so sure in stocks?

Weren't there alot of people sure in stocks during the crash in the 30's?

Buddy - do what you like - but telling everyone to just invest in stocks is as stupid as telling everyone to just invest in gold.

Anonymous said...

Ron Hubbard...as in the guy who founded Scientology...that's who you mororns take your advice from? OMG you are more insane than I thought.

Thwack!

No. Peak oil is geology and physics, not lunatic cultism.

M. King Hubbert. A top geologist for Shell.

Inform thyself: www.theoildrum.com

The lunatic cultism is, in truth, the FoxNewz GOP cornucopianism greed-is-good-ism.

Anonymous said...

Hey Keith, new stupid question of the day:

Why are Americans so concerned about the American flag, but don't give a damn about one of their most important symbols, the dollar?

Anonymous said...

The more things change the more they stay the same. You can freak out or you can just gow with the flow and stop worrying so much. I choose the latter.

Wrong, my simplistic thinking sheeple. We are at war, biggest deficit in history, housing bust, credit crisis, global warming, Peak Oil, and worst of all, the Baby Boomers will start hitting Medicare while the country is bankrupt. Good luck to all!

Anonymous said...

OT. Am I the only HP who starts reading every thread from the bottom up? Just curious.

Happy Homedebtor said...

Now we've got the petty insults out the way, are you saying that in 1980 interest rates were not in fact 18%, houses were not about $30k or that America didn't have both a manufacturing and savings base?

If so, care to back it up?

November 07, 2007 5:42 PM
=============================

Interest rates were that high.

Housing prices, in the DC suburbs at least - and we're not talking VA, we're talking PG pre-pure-ghettofication, back when caucasians weren't a myth - were low-100s. So you're off by a factor of 3-4x there, and that's for a standard 2K sq ft colonial withOUT a basement built 20 years prior. I'll give you manufacturing and savings because the evaporation of manufacturing is recent, and the spendspendspend is more of a recent development too.

However, manufacturing and farming...2 of the oldest, lowest-technology businesses out there, the latter receiving BILLIONS in subsidies. Why the hell is it a bad thing that we lose either/both? The PROBLEM is not the manufacturing base going away, the problem is the repressive religious-nuts in charge that aren't working to further technology. Technology/science and the advantages they give are what have allowed this country to grow/expand/dominate - but under the Bush regime, these have stagnated and thus, we're losing our status as a superpower. This fact combined with offshoring and further globalization will be the end of the US as we have known it up to now. Who gives a damn about China? It's a spoiled brat that simplified it's language to up its literacy rate. Now *India*, where they're cranking out scientists and engineers and IT/CS professionals at record rates...they are who you should worry about.

drew said...

Keith, yes, the Dow is down 18% in gold terms and 2% in euro terms, but that's meaningless to the majority of goods and services in the economy. Would you have made a good return if you'd gone into gold before this run-up? Yes, of course.

But, while too simplistic, Frum's got the basic problem with the gold standard down pretty well. I love the site, but you've got to drop these fairy tales of the Austrian School. (They're about as real as the one about a guy named Noah putting two of every animal on a boat.) Purging the excesses of a liquidity flood makes sense, up to a point, -- that is to say that the von Mises line of reasoning isn't entirely wrong -- but following that to the conclusion of the gold standard being the one and only way is both foolish and dangerous.

I'd rather the power be in Bernanke's hands than in those of some foreign mining company.

The gold standard was a major reason a rough recession turned into the Great Depression. Booms and busts were even more violent under the old monetary regime.

The system we have generally works. What's needed is reform of the mandate, providing for an inflation target. And said target needs to be on an inflation measure that incorporates asset booms and busts.

doppelzoo said...

Ron Hubbard...as in the guy who founded Scientology...that's who you mororns take your advice from? OMG you are more insane than I thought.
-----------------------------------

It's M. King Hubbert not Ron Hubbard.

Carnap the great said...

"Don't you think it would be nice to have something real instead of bills printed by a runaway press?"

In what way is gold more real than paper? What gives the gold more value than the paper? Gold is a metal with some nice properties, the world could easily do without it. Like our bills gold has no intrinsic value.

If you want a hedge against inflection own a house (And I mean really own, not rent from the bank).

Anonymous said...

Jesus, you fecking dumplings.

It was M. King Hubbert who predicted peak oil, not L. Ron Hubbard.

Go and check out Hubbert's Peak Theory.

Budvar said...

"Housing prices, in the DC suburbs at least - and we're not talking VA, we're talking PG pre-pure-ghettofication, back when caucasians weren't a myth - were low-100s. So you're off by a factor of 3-4x there, and that's for a standard 2K sq ft colonial withOUT a basement built 20 years prior"

I'm sure houses in the Hamptons were a bit more than $30k too, but I said houses in America, not Houses in DC etc.
What prices houses in LA, Atlanta, Houston, New Jersey or Chicago you know places where everyday shmoes lived?

Anonymous said...

"Anonymous said...
OT. Am I the only HP who starts reading every thread from the bottom up? Just curious."


.eno ylno eht ton ruoy oN

Dale said...

I don't usually comment on these threads, but this one just got to me.

First of all, Peak Oil may have some validity (not much, but some) but the fact is if we start running out of oil (and the government and the envirowhackos get the f*ck out of the way) we will always have enough energy to operate our economy. Solar power (which is probably a decade away from being cheaper than oil), NUCLEAR energy (which we should have been investing in for the last 3 decades- see government interference and envirowhackos) and geothermal power are still available. We may see short term runs in energy prices, but as long as the market is allowed to work, other alternatives will present themselves.

As for gold, all of the people who don't understand that the Federal Reserve has inflated away 95% of our currencies purchasing power over the last 95 years are the same people who think that gold is "a barbarous relic". We have built our financial house on shifting sand (or in this case, paper) and when it falls, it will fall hard. Mises and the Austrians will be vindicated in the end. It is simple common sense, but unfortunately common sense left the economics profession decades ago.

I read an article a few weeks ago that showed that people who have taken economics courses do worse than people who have never taken an economics course when it comes to tests of real-world economic consequences, with people who have a masters or above performing the worst. They asked them questions about what the economic consequences of certain actions would be, with the catch being that these things had actually happened so the outcomes were already known to the testers. "Ignorant" people understood what would happen better than those schooled in the "science" of economics. Keynesianism has ruined the economics profession. If we had a commodity backed currency we wouldn't have the level of government profligacy, foreign policy belligerence, wealth-destroying inflation and "boom and bust" cycles that we have today.

Government is the primary cause of economic panics and crises, due to their interference in the market and their foolish attempts to "set interest rates". When they set them too low (see 2001-2005) we have massive malinvestments of capital (the housing and commodities boom) that must be liquidated. The economic problems we are facing today stem directly from this wrong-headed monetary policy.

Ron Paul is riding the wave of a perfect storm of foreign entanglements gone wrong, fiscal policy gone crazy and government intrusion into the civil sphere gone fascist. If it weren't for this mix of disaster piled upon disaster, he wouldn't have a ghost of a chance of winning. Because of these things, Ron Paul will most likely find himself the next president of the United States- and we will all thank God for it!

dr chaos said...

Keynesianism has ruined the economics profession. If we had a commodity backed currency we wouldn't have the level of government profligacy, foreign policy belligerence, wealth-destroying inflation and "boom and bust" cycles that we have today.

that is absolutely 100% wrong, and there's plenty of historical evidence.

In the 19th century the USA and UK were on the gold standard (UK rigorously, and USA most of the time), and yet they had extreme boom-bust cycles and plenty of political belligerence.

Thinking otherwise is another illconsidered and incorrect orthodoxy of the Austrians and goldbugs. Yes, Austrian economists can be wrong, and they can be very wrong.

This doesn't mean there aren't plenty of problems, but concentrating on the money side of things is the illusion. The real side of things is actual productive wealth: actions in the physical economy. Here we've gotten the shaft. But not by fiat money.

And yes, a little inflation benefits equity owners over bond holders. And that's a good thing, if it rewards founders and owners of productive businesses over rentier bond class.

However, today this has been perverted through massive management option 'grants', getting the massive rewards without taking the risk.

Anonymous said...

Ron Hubbard...as in the guy who founded Scientology...that's who you mororns take your advice from?

Wow, he thinks that it was Ron Hubbard...bwahahahahaha

miltfriedman said...

In the 19th century the USA and UK were on the gold standard (UK rigorously, and USA most of the time), and yet they had extreme boom-bust cycles and plenty of political belligerence.

Well these boom and bust cycles were caused by bank panics, not the gold standard--the exact thing you are arguing for is waht caused the bank panics. The Fed, FDIC, etc were created to help prevent bank panics, but they only buffer us from mid-sized problems. We avoided a problem in the 80s with the s&l crash because the FDIC helped out the FSLIC. This time,total bank deposit far outnumber the liquidity in the FDIC, and in fact, far outnumbers government tax collections. If things get bad, being FDIC insured isn't going to mean a thing.

You mention an economy which grew from fledgling in 1800 to a superpower by the 1950s. Regardless of the monetary policy in place, we would have experienced growth. What about Europe, how did fiat currency work for the Weimar Republic and its huge deficits? Why did Rome fall? Nero debased the currency, the empire fell.

When we lose faith in our currency, the empire will fall. We would not lose faith in our currency if it was based on something. We

Roccman said...

Hey Keith...

I cannot recall a thread with more peak oil believers posting.

I take pay pal.

econ buff said...

DALE-

do you know which article had that info about people trained in econ having worse real life predictions?

formally studying econ helped me better understand things later on in terms of being comfortable with econ and game theory basics. a lot of Americans get scared by some of the basic concepts and just stick their heads in the sand for fear of looking dumb from there on out.

traditional econ models require a lot of assumptions and simplifications that don't happen in reality. it makes some points easier to learn, but I can see how it can distort real world analysis.

it feels like econ classes taught me the trees, but Ron Paul teaches the forest. sadly, I got subjected to Keynesian econ with no Austrian strain of economics.

I try to imagine what Ron Paul's message would sound like to someone who never took an econ class. I hope it resonates with them too. He's pretty good at explaining things in the tiny bits of time they give him.

I didn't know about the history of our central bank and income tax until he came along. I just knew the general effects of different central banking policies in a vacuum. I didn't see the major distinctions between income taxes vs. sales taxes before him. I tended to get into that nasty habit of thinking we are the subjects of the government, rather than the government being for the people. He also throws in a lot of interesting history about our foreign policy as well, current unconstitutional laws, acts, etc. All other politicians and MSM like to keep things in a vacuum so you don't see the big picture. Or maybe to be less paranoid, they are just career politicians and communications majors that don't know the big picture. He even got scolded on faux news for "giving a history lesson" when believe me, Americans need it. I need it! Ron Paul and the internet revolution have taught me so much!

Anonymous said...

miltfriedman said...
In the 19th century the USA and UK were on the gold standard (UK rigorously, and USA most of the time), and yet they had extreme boom-bust cycles and plenty of political belligerence.
===============================
George Schultz trained under Milton Friedman at the U of Chicago. George Schutlz was the advisor to Nixon, instructing Nixon to cancel the Bretton Woods Monetary System in favor of a floating exchange rate system.

Enough said...what a f@cking disaster.

Down with Econ 101, free markets and all that other vodoo.