johnbee

Falling Equities Still Key for U.S. Dollar

There has always been credit expansion since the days of barter only stopped. It's credit that makes the world go round and the manufacture of money to do it by different ruses. There have been many times since the world war 2 when there has been too much weight of money needing to find a home (emerging markets; the .net boom etc) but yet the money rolls in endlessly from pension schemes etc and a new way need be found to spend it, or create new credit. Each time the new investment areas are overdone and the dealers make their commissions on the back (up and down) and there is a correction for a year or two, but optimism and new methods and opportunities come about. Only when money is totally wiped out will the whole system disappear, such as in a war, but it won't because people need to work and will work and produce and even in war will produce munitions for low wages. Money is not wiped out this time (maybe 10% of overall value in the world at best). So investors will reappear (even if its GS and JPM with borrowed funds) to take advantage of prices at half what they were a year ago and are not as bad as in the '70's when markets fell even further (down 75%) and inflation repaid the debts and gave way to the boom '80's.
If you are in employment you will eat, and its only the welfare state
and impossible pension rates which create a false labour market. This market will come right again sure enough. Maybe not in 2009 but what is a year or two of downside in ten? There are endless improvements in technology to come through but the rewards will be shared by all the world, not just the West as before. That's the biggest problem the West need resolve for their peoples, as they will need be equal with others in the next decade or so. In China when I was there 4 years ago the supermarkets in Beijing were as good as in the West and the prie of a good size melon was 10 cents, so $50 a week salary goes a long a way. The $ need fall to repay US debts but Bernanke is letting it happen slowly and will not let US interest rates rise too fast to kill the recovery. It will take time for the $ not to be the No 1 reserve commodity as countries need unwrap their positions slowly and find another alternative that can be used successfully. If it was to be oil and there is limited production in the hands of a few then the rest of the world would be open to blackmail. You can at least print $'s when you need them,
without limit, and you can recall them also, but not so oil or gold.
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On Jun 11 12:58 PM Living4Dividends wrote:

> Micheal Young - I agree with you (At least about the Dollar)
>
> Ludwig Von Mises put it best when he said:
> " There is no means of avoiding the final collapse of a boom brought
> about by credit expansion. The alternative is only whether the crises
> should come sooner as the result of a voluntary abandonment of further
> credit expansion, or later as a final and total catastrophe of the
> currency system involved."
>
> The problem is that it might encourage other currencies into a competitive
> devaluation. I still think the dollar will devalue.
>
> On Jun 11 11:39 AM Michael Young wrote:

Sell the Dollar, Buy the Euro? Think Again.

Europeans are more used to taking a beating than Americans and are more stoical about it and knuckle down to bad news and as a result their Governments are less likely to inflate with the Weimar Republic in mind, so the risk of Euro collapse is less, unless of course the $ collapses, when I assume we will all be in he same boat. Hence the possible case for the Euro versus the $, although probably not the same for stocks. Chickens may be the best answer -if you can get enough- but they come home to roost as well!