[Henry Cate]

Well, you probably "floor" all those experts because they are appalled by the question, which does not bother to define its terms.

If you're talking about the paper money we hold in our hands, it obviously "comes from" government printing presses. I think that's called "M1" in econojargon.

But that isn't what you meant, is it? You had some other idea about the "meaning" of money, and, given your promises to nationalize everything, plus "Lenin lives!" -- I am going to suspect that you think that Labour is the source of all value. To which I vote, "Present."

Think about it a bit. A man works his whole life and saves money. By the time he is 30, he has enough capital and credit to open his own shop. He makes even more money, and, being smart enough not to fall for the silly idea that "money is a store of value," he moves his funds into investments in his own shop and in other businesses. What a lot of people don't really see is that "his own shop" is already an important contribution to the amount of capital in the economy. (Remember all those lefties who slammed Britain as "a nation of shopkeepers?" It sure worked a lot better than "a nation on the dole," didn't it?)

Let's further imagine that "his own shop" is a factory, for making pins. He gets enough capital and credit to install the latest pin-making machinery ("capital goods/tools") and wipes out all his competitors still using manual labour to make pins. This was the point I was making before, to which one bozo replied "Bullshit." If you look at America or Europe or Japan or Australia -- the former "First World" in general, you will see a massive equipment in capital machinery which makes all the workers much more productive. In countries which have not yet done this (for example, Thailand) you will see construction being done by swarms of people who are barely earning a living wage, and agriculture will be the same.

After all, what does it mean: a "developed country?" Among many other things, it means that the corn harvest in America is carried out by ONE person in a huge tractor, sitting in an air-conditioned cabin no less. It means that automobile workers in Detroit have yachts. Without this capital investment, the harvest is carried out by hand, at an enormous human cost.

So, my thought for today. Instead of thinking about "capital" and "capitalism" as Evil Things, look upon them with respect, as the blood, sweat and tears of your ancestors. It's quite definitely a form of "stored labor." Labor AND capital produce value.

And I will finally note that, in the absolute sense, government produces nothing. I think that government is obviously something we cannot live without, but I certainly do not dream of putting government in charge of everything. I feel kind of stupid for saying this, but: THAT HAS ALREADY BEEN TRIED. And it was an unmitigated disaster.

[z909]

Automobile workers in Detroit are not a great example.

GM, Ford & Chrysler have a combined stockmarket capitalisation less than a fraction of that of Toyota.
These companies are losing money hand over fist & one or more is likely to go bust in a prolonged downturn, unless bailed out by Bush.

[ceejay]

(Remember all those lefties who slammed Britain as "a nation of shopkeepers?"

Actually, the first person to use it was Adam Smith - and you can hardly accuse him of being a lefty.

Napoleon may or may not have been quoting him when he (contempuously) referred to England as a Nation of Shopkeepers. Actually, he was closer to being on to something than he ever realised. If he had understood the British would take it as a compliment, he might have understood the British Empire - and from there he might have gone on to rule the world.

[ikarus]

I think this is difficult to predict ...

I guess we could all pool our ignorance OR we could put the same time to better use by reading from the guy who predicted all this would happen two years ago - Nouriel Roubini - http://www.rgemonitor.com

Or may be you reread my posts here. I have predicted it too on this very message board and I posted some relevant articles over here. You basecally ridiculed me and all doomand gloom crowd and even gave the names of your own economic gurus... Rubini was not one of them at the time. At least has the balls to recognize that you were wrong..

[homintern]

You basecally ridiculed me and all doomand gloom crowd ...

Perhaps you'll provide some hyperlinks to back this up. If so I'll be happy to apologise

[stevekoolguy]

Printing further money will weaken the Dollar against other currencies. Also, with the huge trade deficit, national debt the Dollar ecomes further weak, because of the credit rating of USD. US economy and it's foundations have great impack on how our money trades internationally. Thai Bhat becoming weak is entirely dependent on how the Thai economy performsaganist other countries. Though, USD infulence over international trading (in USD) and the demand it creates also has an impact on how it performs against other currencies. Political stability, both in US and Thai would also impact the currency value. Given the current economic woos in the US, the political alternative we have is not going to make much difference in the near future. Both candidates lack the wisdom to steer through these tough times. So it is waiting game ... another 2 years before USD can fetch 40 Bhats?

[ikarus]

Printing further money will weaken the Dollar against other currencies. Also, with the huge trade deficit, national debt the Dollar ecomes further weak, because of the credit rating of USD. US economy and it's foundations have great impack on how our money trades internationally. Thai Bhat becoming weak is entirely dependent on how the Thai economy performsaganist other countries. Though, USD infulence over international trading (in USD) and the demand it creates also has an impact on how it performs against other currencies. Political stability, both in US and Thai would also impact the currency value. Given the current economic woos in the US, the political alternative we have is not going to make much difference in the near future. Both candidates lack the wisdom to steer through these tough times. So it is waiting game ... another 2 years before USD can fetch 40 Bhats?

I know that I am asking for trouble here but I beg to differ on this issue. There are two groups of people in US who are responsible for the current crisis: big financial institutions (Wall Street) and those who choose to live far beoynd their means. In both cases greed and stupidity were the driving factors. By the way, there are plenty of Americans who do pay off their mortgages, have adequite savings and prepared well for their retirement. IMHO these are precisely the people who should be protected by US government in current economic storm. It hardly can be worse to have somebody in the White house with big spending programs based on increased taxes. It is even worse to have somebody who have in mind redistribution of wealth ideas... What we need is fiscal conservatism, drastic spending cuts and new regulation to put some curbs on Wall Street which really got drunk during recent years. No more bailouts for Mazarati owners from Wall Street. We also need someone in the White House who will be ready for politically unpopular decisions and the will to go againts the crowd. In the absence of Bill Clinton, my choice is obvious. Of course, in desperate times the mob needs some kind of messiah who would
perform necessary miracles and bring everything to normal. There is a candidate who pretends to be the one but I assure you, he is not.
Americans finally should wake up to the reality that the party is over...

[Lunchtime O'Booze]

Henri Coot : "Let's further imagine that "his own shop" is a factory, for making pins. He gets enough capital and credit to install the latest pin-making machinery ("capital goods/tools") and wipes out all his competitors still using manual labour to make pins. This was the point I was making before, to which one bozo replied "Bullshit." If you look at America or Europe or Japan or Australia -- the former "First World" in general, you will see a massive equipment in capital machinery which makes all the workers much more productive. In countries which have not yet done this (for example, Thailand) you will see construction being done by swarms of people who are barely earning a living wage, and agriculture will be the same.

After all, what does it mean: a "developed country?" Among many other things, it means that the corn harvest in America is carried out by ONE person in a huge tractor, sitting in an air-conditioned cabin no less. It means that automobile workers in Detroit have yachts. Without this capital investment, the harvest is carried out by hand, at an enormous human cost.

So, my thought for today. Instead of thinking about "capital" and "capitalism" as Evil Things, look upon them with respect, as the blood, sweat and tears of your ancestors. It's quite definitely a form of "stored labor." Labor AND capital produce value. "

you mean there are still factories in these places that manufacture things ?

America is reeling towards being the first modern Fascist state. First-one must bankrupt the country as Mussolini and Hitler found, and then bring in new laws to build the economy again but under the auspices of "patriotism". The exact thing happening in the USA today. Instead of abadoning these private enterprises that have gone to the wall..the Bush regime is socilaising their losses at the cost of the taxpayer and thus-Wall Street and all investors suffer no loss-as they should havE gamblIing on the Stock Exchange.

Including in the new laws that will "save" Wall Street bankers is a clause that says the Treasury Secretary has complete control over bailing out private companies. He cannot be challenged and more importantly :

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

So Congress, the Senate merely become rubber stamps to a crony chosen by president Palin, who under another bill likely to be passed (as no Democrat wants a Mccain assault of "being soft on terrorism")-the president is proclaimed a "war president" until the very last "terrorist" is captured !( the definition of terrorist being one the president decrees) Essentially-the president will be above the law.

So. if we thought the Iraq War was a handover of public monies to Haliburton etc-we aint seen nothing yet. A president who is above the law, a Treasury Secretary likewise-together they rule completely. Plus the president can decree anyone innocent or pardon anyone he/she likes !

Capitalism is dead..arise Facism Mk2
we had nice red tractors in the USSR too you know !

[Henry Cate]

you mean there are still factories in these places that manufacture things ?

Where do you think BMWs come from?

America is reeling towards being the first modern Fascist state.

You love saying this, but, in fact, America is the first great modern democracy. That democracy was built on the English common law, and the unwritten constitution, but there's no question that America is a democracy and that George W. Bush has been TWICE elected President.

The reason you love saying that "America is becoming fascist" is because it helps you with your idiotic idea that America should become communist. The most idiotic thing of all is believing that there is some sort of Important Difference between fascism and communism. Hell, they both established total societies, took over the media, put people in concentration camps and killed millions of their own citizens. What's the diff?

Regarding the bail-out bill, I think you should first wake up, smell the coffee, and realize that this is THE OPPOSITE of an attempt to bankrupt America. No, indeed. I have recently become aware that the housing bubble was threatening to cause something very dire: a meltdown of the entire American economy. So, for the first time in...decades?...Republicans and Democrats put party differences to one side and worked together to craft a solution. It will be terribly expensive...the last figure I saw was $700 billion. That's about $2500 per American (but please check my math).

Frankly, given the tax burden currently imposed on Americans, $2500 will hurt. But we'll step up to the plate, and do it, and clean up our own mess. Nobody, and I do mean NOBODY, wants a global economic meltdown.

In the meantime, I gather that houses in America are getting quite a bit cheaper. That should do something to satisfy the "affordable housing" crowd, but I don't see them cheering.

Burst bubbles are dangerous, and have been ever since the Tulip Bulb affair in Holland. In the past two decades, Japan suffered from a dual POP -- in housing and in the stock market. They take a long period of recovery.

But if you're looking to snap up a house in California for a cheaper price, we are getting close to the moment to act.

[homintern]

Americans finally should wake up to the reality that the party is over...

Still waiting for the hyperlinks so I can apologise

[ikarus]

Americans finally should wake up to the reality that the party is over...

Still waiting for the hyperlinks so I can apologise

O'K Homi, I have already accepted your apology. However, if you want details, go back to the thread Rent or buy started by Thrill Bill on April 21. I posted two articles of Peter Shiff on this thread. I reproduce here two of your responses to these articles. I also reproduce one of the articles here posted over there. I have to say that I have been consitent with my views for a long period of time.
Your reaction to the first article:
On the balance of probabilities, and using sheer logic, that is so unlikely to be the case that (like belief in God) I'm prepared to live as if it won't happen. My personal preferences for economic analysis are Paul Krugman, Tim Harford, Steven Landsburg and Ross Gittins. Chicken Little doesn't feature in that list
Oh, so this is a promo for a merchant of doom book. These things are cyclical. If we're going for economic analysis I prefer someone who isn't running around telling us "the sky is falling, the sky is falling"

This is my response back then.


Wow, Homi. You presented a very respectable choices. I am especially impressed by your American choice (who is, in fact, pure Mathematician!). I always thought that you are one
of (very few) brilliant minds on this message boards and that is why you are hated so much
by "local mob".
However, I do prefer practitioners (especially with proven successful record of investments)
to journalists and theoreticians when it comes to economic forecast.
That is why my list would be more like George Soros, Jim Rogers, Mark Faber and, yes, "little chicken" mentioned in my previous post. Though he may not be so little (e.g. he served as economic advisor on Ron Paul presidential campaign). I cannot avoid a temptation to give another example of his work (see below).
Regarding the probabilities of forecasts to be successful, one should keep in mind that the guy
is talking solely about US. I think the probabilities are very high in this case. The situation in UK (though quie bad) is not identical to US. And, of course, Australia is a completely different story.
I mention it, because one of the Homi choices is an Australian journalist writing on economic topics.
Can I presume, Homi, that you are a reader of "Slate"?






U.S. Dominance Bites the Dust: How Wall Street Sold Itself Down the
River By Peter D. Schiff Guest Columnist

Over the past half-century, the United States has seen its global
dominance in dozens of industries slip away. One plum that we have
maintained is our gargantuan financial-services industry, whose
contribution to total gross domestic product (GDP) more than tripled
between 1947 and 2005. However, as a result of the current global
financial crisis - manufactured on Wall Street and exported to the
entire world - the United States may well lose its
financial-services crown, as well.

Once upon a time, America owned the automobile industry. But after
several decades of excessive taxation, onerous government
regulation, union extortion, and a crushing lack of foresight and
innovation, we no longer dominate an industry that we practically
invented. Just as Detroit no longer claims center stage in the
world automobile marketplace, soon New York will lose its position
at the center of global capital markets.

In the first place, the center of finance tends to go where the
money is. Right now, all the money is coming from Asia and the
Middle East - much of it from state-controlled investment pools
known as "sovereign wealth funds." When the United States was the
world’s greatest creditor nation - and its largest supplier of
capital - it made prefect sense for that capital to be allocated
here. But why should the Chinese send their savings to New York
only to have it re-invested back in China? Wouldn’t it make more
sense for the Chinese to allocate their capital locally, rather then
out-sourcing the job to us?

In the second place, when the strength of the U.S. greenback was
widely regarded, it made sense for global savers to allocate
substantial percentages of their savings to dollar-denominated
investments. This preference gave Wall Street a competitive
advantage in attracting capital. However, now that confidence in
the dollar has evaporated - perhaps permanently - this advantage has
been lost.

First Detroit, Now New York … It was once also true that investments
in the United States were encouraged by America’s respect for
private property, low taxes, and minimal government regulation. But
this advantage also has been lost as other nations have strengthened
their private-property laws, deregulated their economies, and
lowered their taxes - while we have done the opposite. As a result,
the returns on U.S.-based investments so far this century have far
underperformed those achieved in virtually every other major market.

Most importantly, Wall Street’s reputation, once its greatest asset,
is also in jeopardy. Just as Detroit lost its reputation for
high-quality cars, bankrupted dot-coms and worthless subprime debt
are creating similar problems for Wall Street. You can’t expect to
keep your customers if you continually sell them shoddy merchandise.
Wall Street has spread hundreds of billions of dollars in losses
around the world and, in so doing, shattered its reputation with
some of its best customers.

It gets worse.

The Deal Wall Street Should NOT Have Made … In the last few years,
Wall Street not only cheated its customers, it cheated its
shareholders, as well. At one time, all of our major investment
banks - such as Goldman Sachs Group Inc. (GS), Lehman Brothers
Holdings Inc. (LEH), Morgan Stanley Inc. (MS), The Bear Stearns Cos.
Inc. (BSC), Smith Barney, Shearson, E.F. Hutton, Kidder Peabody and
Salomon Brothers - were private partnerships. However, during the
1990s they all went public [Of course, many merged first, so they no
longer exist as independent firms]. Goldman Sachs was the last to
go public in 1999. The transition allowed longtime Wall Street
partners to cash out, transferring future risks to new shareholders.
In doing so, they were able to capitalize on bubble valuations, yet
through lavish bonus compensation packages, were still able to keep
the lion’s share of the profits for themselves. In other words,
they got to have their cake and eat it too.

As a result of this transfer of risks, the business models of
America’s leading financial institutions shifted, with profits
coming from riskier sources, such as proprietary trading and
structured finance. To line their own pockets, Wall Street firms
willingly exposed their shareholders to risks that they never would
have assumed when the companies were partnership-controlled and
using their own capital.

This moral hazard set the stage for the enormous losses shareholders
are now suffering: Those losses are a direct consequence of the
phony profits booked in prior years. The former Wall Street
partners-turned-employees have already walked away with huge IPO and
stock-option windfalls - as well as lavish bonuses paid on those
phantom profits. And shareholders are left holding the bag.

The coming crash will very clearly expose these conflicts of
interest, and the reaction will be severe. In the end, finance and
banking - like manufacturing - will stand as yet one more industry
where U.S. dominance was ceded to foreign competition. The new
financial capitals will likely be in Asia, the Middle East, and
Europe.

New York will certainly still have a role to play. But much like
Detroit, it will be a shadow of its former self.

[homintern]

O'K Homi, I have already accepted your apology.

You're quite welcome, but you have misunderstood my original comment, and no apology is offered. The "author" to whom you refer was limiting himself to the USA, and his writings are of the hysterical variety so popular in the US. I've mentioned "self-loathing" in another context - perhaps it's America's Puritan heritage coming to the fore. The context in which you quoted him was along the lines of "the sky is falling in the US, transfer your money overseas, in particular buy property in Pattaya" and, as I said, I'm prepared (as I still am) to behave as if that won't happen on the balance of probabilities. There are two simple reasons (1) buying property in Thailand is a fool's errand, for the reasons given in Stickman's column a couple of weeks back, but, more generally (2) globalisation. If the American financial system implodes, nowhere is safe. I'll take my chances along with the rest of the world on that one. While a sceptic overall, I happen to believe in the ingenuity of man; we will get out of this mess - see my Third and Fourth Noble Truths - http://www.sawatdee-gay-thailand.com/fo ... 15886.html

If you think a crackpot like Peter Shiff is worth reading (let alone following), good luck to you. His premise is based on the notion of de-coupling (that is, these problems will be confined to the US and the rest of the world, in particular China, will sail blithely on, almost as if it isn't happening). As is becoming clearer by the day, de-coupling is merely wishful thinking. Yes, I read Slate - and a number of other publications. If something there resonates, usually by providing an insight or a fresh perspective, I think it's of value. For Americans its main value is that it carries articles by the British writer Tim Harford who writes in the FT as "The Undercover Economist". Slate is interesting, but its general left-wing, sometimes anti-capitalist, bias has to be discounted at times

I haven't yet noticed Warren Buffett, who told everyone as far back as 2002 that financial derivatives were toxic and a disaster waiting to happen, has followed the advice of a charlatan like Shiff and moved Berkshire Hathaway's investments offshore - and let's face it, he's had 5 or 6 years to do so since 2002

[ikarus]

O'K Homi, I have already accepted your apology.

You're quite welcome, but you have misunderstood my original comment, and no apology is offered. The "author" to whom you refer was limiting himself to the USA, and his writings are of the hysterical variety so popular in the US. I've mentioned "self-loathing" in another context - perhaps it's America's Puritan heritage coming to the fore. The context in which you quoted him was along the lines of "the sky is falling in the US, transfer your money overseas, in particular buy property in Pattaya" and, as I said, I'm prepared (as I still am) to behave as if that won't happen on the balance of probabilities. There are two simple reasons (1) buying property in Thailand is a fool's errand, for the reasons given in Stickman's column a couple of weeks back, but, more generally (2) globalisation. If the American financial system implodes, nowhere is safe. I'll take my chances along with the rest of the world on that one. While a sceptic overall, I happen to believe in the ingenuity of man; we will get out of this mess - see my Third and Fourth Noble Truths - http://www.sawatdee-gay-thailand.com/fo ... 15886.html

If you think a crackpot like Peter Shiff is worth reading (let alone following), good luck to you. His premise is based on the notion of de-coupling (that is, these problems will be confined to the US and the rest of the world, in particular China, will sail blithely on, almost as if it isn't happening). As is becoming clearer by the day, de-coupling is merely wishful thinking. Yes, I read Slate - and a number of other publications. If something there resonates, usually by providing an insight or a fresh perspective, I think it's of value. For Americans its main value is that it carries articles by the British writer Tim Harford who writes in the FT as "The Undercover Economist". Slate is interesting, but its general left-wing, sometimes anti-capitalist, bias has to be discounted at times


You know Homi, the more you write the more it is obvious for me that you are completely ignorant on the subject of economy. Peter Shiff is not crack pot or charlatan as you put, neither he is chicken little. He made a correct prediction in the cited article of the demise of Wall Street and he mostly correctly identified the reasons for that. He is running a successful investment business. I am so sorry that you have no guts to apologize and frankly, I am changing my mind about you as a person.
Undoubtly ,there is an economical decoupling. Not at the level of capital and credit markets but surely on economic level. No matter what is going to happen with the rest of the world, China will continue to grow. It needs to , to provide jobs for dozens of millions Chinese who are migrating from rural areas to cities. This is Chinese way of elimination of poverty and they understand they need to do it to move forward (you see, Chines communists have better understanding of this issue than Thai elite). Moreover, China currently has enough resources to do it with the goal to improve infrastructure and reorient to significant extent to internal market. And, indeed, it is much better to spend
US dollars in their reserves (accumulated to significant extent in mortgage supported US bonds) for this purpose rather than to watch how above mentioned bonds become a piece of paper with the only use in toilet.
You mentioning of Warren Buffet is just totally ridiculuos. There is no doubt that Buffet tries to diversify overseas during recent years. He bought some foreign businesses and looking for more aquisitions. He hold currency positions against US dollar with mixed results. He obviously cannot move the bulk of his business overseas (e.g. his US insurance business). I do not cite Buffet , because he is not comfortable in the present economic environment and many of his businesses loose money.

The skies , indeed, are falling and I am sorry that you do not see it. Is it possible that US financial system collapse? Yes, it is possible because US government cannot bailout 62 trillion dollars of credit default swaps. Does it mean that the rest of the world will follow suit? I do not know the answer to this question. But if you ask me, say, twenty years down the road the answer will be no. I do not trust comrade Paulsen. As a former CEO of Goldman Sachs (which could be next in line for the demise after Morgan Stanley and which has a huge amount of level 3 assets on its balance sheets ) he clearly has a conflict of interests in the matter of bailout. I do not trust Bernanke who showed total misunderstanding of the economy. This dynamic duo of banking investor and Princeton professor obviously has no clue what they are doing and improvise along the way as if they play another economic game. With this type of leadreship chances for successful outcome of this ordeal are minimal.

[homintern]

... I am changing my mind about you as a person

[homintern]

For those who want a more nuanced view of the current crisis, I suggest the nine-page supplement in this week's Economist. Oddly enough they don't suggest selling up all your assets in the US and buying a condo in Pattaya