Stinger said:
Well don't we do that everyday?
No.
Stinger said:
We have about as free as it gets. Ever hear about Ebay?
1) Of course I have heard of Ebay.
2) The economy at large does not resemble Ebay.
Stinger said:
I really have no idea where you get this. Define "too rapidly". Let's see the economy was in a recession when Bush came into office and assets and net worth weren't rising, now they are and there are still complaints?
Net worth has been on the rise for the last decade and a half.
Anyway, there's no way to tell what "too fast" is, except by comparing it to other bubbles that have popped. The dotcom bubble is a pretty good example--everyone would now agree that the value of the market grew too fast to be sustainable.
And this is hardly mysterious. When the P/E ratio of a stock (for example) goes too much over 30, we tend to say that it's overvalued regardless of whether there are still people willing to purchase shares. Smart money (without insider knowledge) tends to stay away from shares with a POP over 30--because any value over that is extrinsic value, and if people all get together and agree that the stock isn't worth the price per share, it'll sink.
I find it difficult to believe that there is 55.6 trillion dollars worth of intrinsic value in this country after debt. Some simple comparisons:
-At 20,000 USD per kilo, that amounts to 97.76 billion ounces of gold (about 17 times as much gold as has ever been produced in the world)
-At 65 dollars a barrel, that's 855 billion barrels of oil (about 145 billion barrels shy of all the oil ever used in all of history)
-At an avg of 1 USD per board-foot, that's 55.6 trillion board-feet of lumber, enough to produce 22.2 billion 2000 sf homes (about 233 times the number of homes that exist in America)
-At an average of 4.60 USD a bushel, that's 12.3 trillion bushels of wheat (about as much wheat as has been produced in the world since roughly 2500 B.C.)
-At an average of 8000 USD per acre, that's 6.95 billion acres of land (about 4.7 times more land than is privately owned in the U.S.)
-At an average of 20,000 USD in equity (which I suspect is high), that's 2.7 billion houses (about 25 times as many houses as exist in the U.S.)
And so on.
In short, 55.6 trillion dollars buys a lot of stuff, so much, in fact, that it is impossible it could even mostly be in items of intrinsic value. Now, I'm not against items of purely extrinsic value (I own some extrinsic value myself), but I am aware of the risk--that's wealth that could, quite literally, evaporate overnight.
My rough and ready guess would be that about 1/4th of that reported net worth is in items of intrinsic value at the price they would naturally trade at in a deflated environment. The other 3/4ths will go away one day fairly soon. I'm sure you don't believe me; I guess the best way to determine who is correct is to wait until about 2020 and see what happens.
Stinger said:
Prices go up and down but in the big scheme they go up else we go into economic collapse and there is no evidence of that.
I think there's plenty of evidence that's what will be happening. I'm expecting a collapse by 2020, possibly by 2015. As energy demand rises and energy supplies contract, collapse will be inevitable. OE supply will peak in 2010, and after that will see declines in the range of 8% per year, while demand will grow 2-3% per year. There's plenty of inefficiency that could be gotten rid of, but at these rates, by 2015 there will be a 42 million barrel per day shortfall of oil. This is conceptual, of course--useage cannot exceed supply, but it's still a useful measure because it shows what we'll have to give up. At current rates of consumption, that means that there would only be enough oil to supply Europe, the United States, and Russia in 2015, provided that the other oil producing nations sell all their oil, which they're unlikely to do unless forced. Without oil to support Australia, South America, Canada, Mexico, China, Africa, etc. etc. a substantial portion of the world's food supply will go away.
And this isn't the only factor at work. As supplies decline, the oil gets more and more difficult to get and process, costing more energy per barrel to produce. So the EROEI (Energy Returned on Energy Invested) is also declining (indeed, has been for some time already) while the supplies are tightening, meaning more of the oil we produce has to go back into producing oil. By 2015, the most optimistic estimates I've read say that average EROEI for oil will be 10:1 (right now it's around 28:1--back when oil got it's start it was about 140:1), which will further constrain supplies--though some of the energy needed will come from coal.
Climate change, manmade or not, will also be affecting food supplies, probably not for the better.
The winners in this circumstance will be those who own land or other things of intrinsic value, or who have skills that matter in a lower-energy environment. Things like stock options and digital gold will lose all value.
This sort of thing has happened before, and it's happening now in some areas of the world, and it will happen again. It will eventually happen in the U.S.
Stinger said:
Tautologies are always trivial; they never tell us anything we didn't already know. Of course the people who lose are the ones in a position to lose. That's
obvious. When Rome collapsed and took Western Civilization with it, it's obvious that the people who partook of western civilization were in that position.
But the deeper questions are whether they could have reasonably avoided it, did they know it was coming, etc. etc. If we find that they could not have avoided it, then we can conclude that the economic system as a whole was bad.
It seems clear to me that we decide on the economic system that seems least likely to cause calamity and most likely to cause prosperity. When that system does the opposite, and to the extent that it does, it's a bad system. If a bubble pops, everyone on top of it loses. This is not mysterious or absurd.
Stinger said:
Ash:Having a sound economy just means that relatively few people are in a position to lose significant value.
StingerNo it doesn't.
If we could somehow know the end results for all participants in an economy as a group (but not as individuals) prior to their participating, and we told them all "a lot of you are going to lose significant value with this system," do you think they'd agree to participate? I don't think so.
Part of the issue is that we've listened to big money propaganda so long that we've become convinced of things that run against all common sense. We only call the economy "good" because we've been taught that "good" means "the economy we have," not because we've looked at the economy we have and think it's good.
A good economy is one in which someone who works and isn't foolish prospers. A bad economy is one in which people can work and be wise, but still lose. Now, there may be other aspects we'd want to consider, but these points seem pretty unassailable to me.
Stinger said:
Not necessarily, it's not a zero sum gain in a growing economy.
Well, I suppose that in a very simple economy, with few participants and vast available resources, what I said isn't really true. But in a complex economy with many participants and constrained resources, it seems there will be losers--somebody buys something on the bet that it's price will appreciate, while the seller sells it on the bet that the price has peaked and will depreciate. Only one of them is right.
Of course it's more complicated than that. Sometimes, the seller just wants to free up some cash. And if the seller sells at higher than he bought, and the price appreciates further, both the buyer and seller are winners. But eventually, someone will sell at the peak price, and someone will be there to buy it. That's pretty basic economics, and it entails that the schumck who did the buying loses.
There are any number of books out there now on why the notion that a growing economy lifts all boats is incorrect. I can recommend a few if you like.
Stinger said:
Which is certainly not the case.
"Everything" relatively speaking. Clearly they don't end up as naked slaves in Thailand.
Stinger said:
Which is certainly not the case.
However, it will be when the bubble I was talking about earlier pops.
Stinger said:
A slow down is likely after the growth we have seen. A recession? Not on the horizon.
People like Warren Buffet and Alan Greenspan have been increasingly warning of a recession in the near to mid term. The Subprime mortgage collapse, depressed home prices, and the collapse of the yen carry trade are all putting pressure on our economy.
I don't think the coming recession will be the "big one." I expect another period of growth between 2009 and 2015, especially as the last remaining megaprojects come on stream in the FSU 'stans, the Gulf of Guinea, and the South China Sea. All that might change if the Dems actually succeed in getting us out of Iraq; if that happens, we can all kiss our collective a$$es goodbye.
