Credit Crisis and Recession Deepen

[Rajiv]

Re: Credit Crisis and Recession Deepen

Money is not credit

Today, ALL money is Debt.

See the video Money as Debt

See also

This was written before 1972 -- before Nixon took the World completely off the gold standard. (click on above image to read more)

See also, the three part thread Money and Debt

[WDCRob]

Re: Credit Crisis and Recession Deepen

i do not expect to live long enough to see this change.

And were you to discover the Fountain of Infinite Youth tomorrow you would still not live long enough to see it change.

[Jim Nickerson]

Re: Credit Crisis and Recession Deepen

Jim,

Yes. Its all IMO, sorry but i thought that was obvious.

Unfortunately i dont have data from 2000s, but i recall very good that extreme sentiment readings at that time were unrealiable regarding the medium-term (monthly+) trend. I refer to this and longer periods as investing.

I should have defined short-term in that respect: several days maybe up to 1-2 weeks.

For even shorter periods down to intraday we talk of tradig and the only measure i respect there is technical analysis and nothing else, no matter what the news or the big picture might be.

As said, IMO to stay invested substantially long in 2008, you have to expect much higher prices or the risk/reward tradeoff is just too low.

Jose, the way it was written in no way suggested to me, at least, that it was opinion. Why not with that widely used and even to me understood "IMO" put it into your statements so no one might suspect we are being visited by a clairvoyant or some covert genius from the big banking industry or anywhere on Wall Street. Nothing is ever wrong with clarity.

I am not directing this toward you specifically, but personally I find posts that make declarative statements without support about what the future holds to be a waste of time to have read.

Thank you for your comments.

[jtabeb]

Re: Credit Crisis and Recession Deepen

Today, ALL money is Debt.

See the video Money as Debt

Yet, the entire deflation argument rests on cash (currency) becoming precious relative to debt, hence an increase in the purchasing power of cash. Seen the vid b4.

[Rajiv]

Re: Credit Crisis and Recession Deepen

The deflation argument rests upon the destruction of credit -- in other words, credit becomes scarce, and hence the money supply reduces.

When the money supply reduces, things become less expensive for those who have money (credit) and those who don't have any credit starve -- or if they have working assets (assets that produce goods --e.g. food) - they become rich.

FYI Currency is nothing but somebody's IOU

See also Reinventing Money



Also from the Money Primer Published by the US Senate

26. What is legal tender?
Legal tender is any form of money which the U.S. Government declares good for payment of taxes and both public and private debts.
27. What is the most important form of money in the United States today?
"Checkbook money" that is, demand deposits in commercial banks. They account, for 80 percent of all the money circulating in the country.
28. Who issues money?
Since the Revolutionary War, the U.S. Government. has minted coins and printed paper money, currency. Other goods, including tobacco receipts, have circulated as “money” although they were not legal tender. But, in the 19th century, the Government delegated its right to print legal tender money first to State banks, then to national banks.

29. Today, who issues coins?
Only the U.S. Treasury has the right to mint pennies, nickels dimes, quarters, half dollars and silver dollars. Then they are issued through the Federal Reserve Banks. The pennies are made of copper; the rest of alloys. Since 1934, the Treasury has minted no gold coins.

30. What is currency?
Currency is paper money, or folding money. Americans use several forms of currency: National Bank Notes, Federal Reserve Notes, Silver Certificates, Treasury Notes of 1890, U.S. Notes and Federal Reserve bank notes. About 94 percent of the currency in circulation today consists of Federal Reserve Notes, issued by the Federal Reserve banks.
.
.
.
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33. Do private banks issue money today?
Yes. Although banks no longer have the right to issue bank notes, they can create money in the form of bank deposits when they lend money to businesses, or buy securities. (The next chapter will explain how banks create money.) The important thing to remember is that when banks lend money they don’t necessarily take it from anyone else to lend. Thus they “create” it.

34. What backs U.S. currency?
Federal Reserve Notes are backed by the credit of the U.S. Government. American citizens, holding Federal Reserve Notes, cannot demand anything for them except (a) that they be exchanged for other Federal Reserve Notes, or (b) that they be accepted in payment for taxes and all debts, public and private.

Thus defining money is a circular argument

[jtabeb]

Re: Credit Crisis and Recession Deepen

Thus defining money is a circular argument

I could not agree more. My gold and silver bullion coins are indeed circular!

[metalman]

Re: Credit Crisis and Recession Deepen

I could not agree more. My gold and silver bullion coins are indeed circular!

money is what a society says it is. yesterday green paper, tomorrow shiny metal.

[jtabeb]

Re: Credit Crisis and Recession Deepen

money is what a society says it is. yesterday green paper, tomorrow shiny metal.

Don't tell that to c1ue!

[Rajiv]

Re: Credit Crisis and Recession Deepen

money is what a society says it is. yesterday green paper, tomorrow shiny metal.

Yes but the transition from one form of money to another may be far from smooth -- it was smooth from gold to fiat dollars -- because fiat money can be inflated easily -- which was the main reason to shift from gold in the first place!

[metalman]

Re: Credit Crisis and Recession Deepen

Yes but the transition from one form of money to another may be far from smooth -- it was smooth from gold to fiat dollars -- because fiat money can be inflated easily -- which was the main reason to shift from gold in the first place!

reversion to the mean... over 100s of years gold is the mean. it's just that simple.

[Thailandnotes]

Re: Credit Crisis and Recession Deepen

c1ue wrote:

"My strategy is about moving into those countries, currencies, and businesses where future production will prosper and I'm perfectly willing to 'lose' relative gains in gold in the process."

I wonder if you could elaborate.

I opened a bank account with Standard Chartered in Singapore about 6 months ago so that I could more easily invest in other Asian currencies. I am curious about how confident you can be in predicting the future of economies in a variety of countries.

Recently, there have been many stories about the price of gold here in Thailand. On Itulip I often read something along the lines of, "The price of gold is not rising. The dollar is falling." This is not accurate in the short term here. Gold is up about 20% in Thailand since September. The baht has only strengthened 7% in that time period.

[FRED]

Re: Credit Crisis and Recession Deepen

c1ue wrote:

"My strategy is about moving into those countries, currencies, and businesses where future production will prosper and I'm perfectly willing to 'lose' relative gains in gold in the process."

I wonder if you could elaborate.

I opened a bank account with Standard Chartered in Singapore about 6 months ago so that I could more easily invest in other Asian currencies. I am curious about how confident you can be in predicting the future of economies in a variety of countries.

Recently, there have been many stories about the price of gold here in Thailand. On Itulip I often read something along the lines of, "The price of gold is not rising. The dollar is falling." This is not accurate in the short term here. Gold is up about 20% in Thailand since September. The baht has only strengthened 7% in that time period.

The official iTulip position from EJ's keynote at the hard assets conference in Las Vegas last year: gold rose in dollar terms 2001 to 2004 then in all currencies since 2004 but more in dollars.

[Hypatia1]

Re: Credit Crisis and Recession Deepen

jtabeb --


I read Atlas Shrugged. It's pure fantasy written by someone without any sense of human nature. It's as realistic as stories about ultra chivalrous knights saving Christendom. The truth of the matter is that you couldn't become a knight by BEING chivalrous! A Knight would have to be ruthless, and so do Ayan Rand's heroes. Her heroes are single-mindedly Geeky and yet Ruthless. Very few people have that combination (Bill Gates does not really qualify as a geek in my book). It's almost always one or the other.

Don't waste your time worshiping Ayan Rand. Save your worship some one more real -- like the Easter Bunny.

[metalman]

Re: Credit Crisis and Recession Deepen

jtabeb --


I read Atlas Shrugged. It's pure fantasy written by someone without any sense of human nature. It's as realistic as stories about ultra chivalrous knights saving Christendom. The truth of the matter is that you couldn't become a knight by BEING chivalrous! A Knight would have to be ruthless, and so do Ayan Rand's heroes. Her heroes are single-mindedly Geeky and yet Ruthless. Very few people have that combination (Bill Gates does not really qualify as a geek in my book). It's almost always one or the other.

Don't waste your time worshiping Ayan Rand. Save your worship some one more real -- like the Easter Bunny.

you managed to get through the whole book? congrats. tried 3 times and never made it more than half way through. one of the worst written books ever. real world... it's all jocks and geeks. looked at this way...

greenspan: geek
cramer: jock
rand: geek
bernanke and central bankers generally: geeks
most of congress & pols in general: jocks
hedgies: geeks
ibankers: jocks (except the analysts: geeks)
paulson: jock

the geeks always work for the jocks.

[jtabeb]

Re: Credit Crisis and Recession Deepen

jtabeb --


Don't waste your time worshiping Ayan Rand. Save your worship some one more real -- like the Easter Bunny.

No worship (I actually believe in god, unlike rand). The only reason why I bring up the work is that the machinations described therein are likely to manifest themselves as this crisis plays out. Nothing more, nothing less.