That dreaded phrase: ''The system is fundamentally sound''

[metalman]

Re: That dreaded phrase: ''The system is fundamentally sound''

I'm sure this is the same phrase used by Zimbabwe President Mugabe, shortly before his government began printing the 10 million dollar note pictured above! They have since printed a 100 billion dollar note. How much would this largest of large bills buy? Not even lunch, only ab out two loaves of bread.

$10 000 000 dollars? i'm rich!!!

we're all billionaires! :eek:

[Andreuccio]

Re: That dreaded phrase: ''The system is fundamentally sound''

$10 000 000 dollars? i'm rich!!!

we're all billionaires! :eek:

What I don't get is why people will take one of the 10 billion dollar notes for anything. They know it's going to be worthless by the next day. Why give up two perfectly good loaves of bread for a piece of paper with lots of zeros?

I know the same could be said in theory for dollars, or any other fiat currency, but at least with dollars there's the collective illusion that it holds value. As long as all of us say a loaf of bread is worth about a dollar, it still works. The fact that the dollar will only be worth 90 cents in a year is outweighed by the convenience of common currency.

But when everybody knows the game, and it's spiraling out of control so fast, there's no more illusion. Why bother?

[Jim Nickerson]

Re: That dreaded phrase: ''The system is fundamentally sound''

What I don't get is why people will take one of the 10 billion dollar notes for anything. They know it's going to be worthless by the next day. Why give up two perfectly good loaves of bread for a piece of paper with lots of zeros?

I know the same could be said in theory for dollars, or any other fiat currency, but at least with dollars there's the collective illusion that it holds value. As long as all of us say a loaf of bread is worth about a dollar, it still works. The fact that the dollar will only be worth 90 cents in a year is outweighed by the convenience of common currency.

But when everybody knows the game, and it's spiraling out of control so fast, there's no more illusion. Why bother?

What is the alternative?

We are in the same boat and have been for decades.

No riots, so far, in Zimbabwe; none, so far, in America.

[Andreuccio]

Re: That dreaded phrase: ''The system is fundamentally sound''

What is the alternative?

We are in the same boat and have been for decades.

No riots, so far, in Zimbabwe; none, so far, in America.

Barter.

I did a google search on "zimbabwe inflation rate". 2nd hit: BBC news from 7/16/2008

Zimbabwe's annual rate of inflation has surged to 2200000%

Why bother taking the paper? I'm too tired to do the math, but it probably loses half it's value within the hour. It becomes an inconvenience to accept it. If you don't trade it fast, it loses value, like a hot potato. Might as well keep the two loaves of bread and try to trade those.

With US dollars, a dollar's worth 90 cents after a year. I agree that it's corrosive, but it's nothing compared to Zimbabwe.

[metalman]

Re: That dreaded phrase: ''The system is fundamentally sound''

What I don't get is why people will take one of the 10 billion dollar notes for anything. They know it's going to be worthless by the next day. Why give up two perfectly good loaves of bread for a piece of paper with lots of zeros?

I know the same could be said in theory for dollars, or any other fiat currency, but at least with dollars there's the collective illusion that it holds value. As long as all of us say a loaf of bread is worth about a dollar, it still works. The fact that the dollar will only be worth 90 cents in a year is outweighed by the convenience of common currency.

But when everybody knows the game, and it's spiraling out of control so fast, there's no more illusion. Why bother?

you've answered your own question. the paper is for buying commonly purchased items like loaves of bread that don't keep any better than the money does. what does it say that all of this paper is still used? that there is nothing better... what else are you going to use? barter a marble or an old bic pen to buy a loaf of bread? folks run out of things to use and can't negotiate the value of 1000 items in exchange for others all day long. you need a new unit... like a cigarette or a candy bar or something else scarce.

liters of vodka were popular in russia as barter money during their crisis.

here in the usa? i dunno. if it ever got post soviet russia bad maybe cans of bud? oh, wait. that's belgian money now.

[Chris Coles]

Re: That dreaded phrase: ''The system is fundamentally sound''

Mr. Shadow Fed, I believe this is not completely accurate.

I understand that the SA Krugerrand lost a lot of shine precisely due to the fact that they are not 99.99% pure (24K), but only 91.67% or 22K pure.

This allowed other gold coins such as the Canadian Maple Leaf (crowd cheering ;)), Chinese Panda and Australian Kangaroo to overtake the gold bullion coin market. Later the US Mint issued the Buffalo which is also 99.99% pure (unlike the American Eagle ones).

I must apologise, I was working from memory. Thanks for bringing me up to speed.

[phirang]

Re: That dreaded phrase: ''The system is fundamentally sound''

Unlike Russia, Zimbabwe, and Argentina, the US CAN AND WILL meaningfully improve its trade deficit, by hook or by crook(ahem ahem).

I'm a broken record now, but watch US Steel's earnings on Tuesday for indicators.

[metalman]

Re: That dreaded phrase: ''The system is fundamentally sound''

As First National and Other Bank Failures Surge, Should You Make a Run for Your Money?

Seven Banks Have Failed This Year. What You Need to Know - and Do - Now

First National Bank of Nevada and First Heritage Bank were shut down Friday. They have various operations in Nevada, Arizona and California. With bad news also coming out about IndyMac as well as a total of at least seven banks failing this year, many are feeling nervous, especially with predictions that bank failures may be set to soar this year.

another strong forecast...

[Verrocchio]

Re: That dreaded phrase: ''The system is fundamentally sound''

if it ever got post soviet russia bad maybe cans of bud? oh, wait. that's belgian money now.

(Belgian money) one of your better comments, M-Man!

[c1ue]

Re: That dreaded phrase: ''The system is fundamentally sound''

Unlike Russia, Zimbabwe, and Argentina, the US CAN AND WILL meaningfully improve its trade deficit, by hook or by crook(ahem ahem).

I'm a broken record now, but watch US Steel's earnings on Tuesday for indicators.

It will be interesting to see how US Steel's product may be more competitive, but at the same time their energy costs will have significantly increased.

From the overall trade deficit perspective - as of May 2008 the gap is still there, and net imports are growing plenty fast enough to keep up with putative net exports.

In fact, it would probably be interesting to graph the net export/import numbers in the past 3 years with the dollar index.

[FRED]

Re: That dreaded phrase: ''The system is fundamentally sound''

It will be interesting to see how US Steel's product may be more competitive, but at the same time their energy costs will have significantly increased.

From the overall trade deficit perspective - as of May 2008 the gap is still there, and net imports are growing plenty fast enough to keep up with putative net exports.

In fact, it would probably be interesting to graph the net export/import numbers in the past 3 years with the dollar index.

New features: custom graphs for iTulip Select subscribers:

The general rule in economic policy is that currency depreciation works to boost exports short term, but the impact wears off because inflation begins to reduce the competitiveness of exporters, and rising import prices reduce purchasing power. So you get flat export growth and crashing imports, per the chart above.

[metalman]

Re: That dreaded phrase: ''The system is fundamentally sound''

New features: custom graphs for iTulip Select subscribers:

The general rule in economic policy is that currency depreciation works to boost exports short term, but the impact wears off because inflation begins to reduce the competitiveness of exporters, and rising import prices reduce purchasing power. So you get flat export growth and crashing imports, per the chart above.

very interesting. combined with bart's latest Financial crisis tracking i'd say we're in for a shitstorm.

[ax]

Re: That dreaded phrase: ''The system is fundamentally sound''

Also, can someone explain to me why Merrill didn't immediately get investigated by the SEC after posting a huge writedown for next quarter one week after a quarter of $9 billion in writedowns? Is this info they didn't have last week?

[tombat1913]

Re: That dreaded phrase: ''The system is fundamentally sound''

Hot Damn!
X is about 15% up today

[Andreuccio]

Re: That dreaded phrase: ''The system is fundamentally sound''

I recommend you put aside at least a few month's cash just in case they prove to be as incompetent and full of shit as in previous instances.

I've been looking into the details of doing this. That's a significant amount of cash.

If we're doing this out of concern that banks will fail and close, safety deposit boxes probably aren't the best option. (I understand there are other reasons why people might avoid them for cash and gold, as well.)

I'm not crazy about the idea of keeping that much cash (or gold) around the house, though, either. I called my insurance guy and cash and gold at home is pretty much uninsurable, at least through him. (Even insuring something like jewlery seems pretty expensive, at about 2.5%/year.)

I'd get a safe, of course, if I decided to keep a large amount of cash, but there are lots of issues with that, too. The quality ones are pretty heavy, several hundred pounds for a small one. Since I live on the second floor, getting it upstairs and positioning it will be a problem. Also, in order for it to be truly secure, it should be bolted into concrete, from what I understand. That's not going to happen on the second floor. Only the garage is an option in that case. But since the garage itself isn't that secure ...

On a separate note, there's the question of what denominations to get. Hundreds would seem to be the first choice for storing cash: easily circulated but taking less space than smaller denominations. But if we're talking about some kind of system collapse, will it be easy to get change for smaller transactions? Would it be better to have a variety of denominations?

Has anybody else though about these issues? Any ideas for solutions, or basis for decisions?