So far I've watched half of it.
The inaccuracies so far:
1) An exponential graph is not a "hockey stick." The term hockey stick, used correctly, is a graph where there's a change in the function being graphed. Just a plain exponential graph looks like this:
http://en.wikipedia.org/wiki/Image:Exp.svgThere is no "vertical section" of the graph. If you zoomed out on the graph, the numbers on the sides would change, but a pure exponential function would stay in the same place no matter how much you zoomed in or out.
2) He neglects to mention that banks can be repayed in assets other than money, for example, when a bank buys a building, or pays its own employees for their labor. This is one mechanism that money can be repayed without more money being created by the FED.
3) He neglects to mention that when the FED loans money, what is supposed to happen is that the money is repayed with interest, and that interest disappears so overall money gets destroyed by that process, which is why it is called a repo (reposession.)
However
1) It may not be a hockey stick but he's right about exponential functions and humans not being able to cope with them. Heck, we can't even cope with polynomials. Try setting a powerful magnet down on your refrigerator without letting it snap. It takes practice because our muscles/brains are mostly evolved to deal with proportional responses, not square law, and especially not exponential.
2) He's dead on about war causing inflation. Mostly because of all the stuff it destroys. The reason why the current wars are cheaper per-capita than previous ones is merely because the weapons have a better bang for the buck. However, they are just as inflationary because they are causing a lot more destruction. The most direct connection to the destruction "over there" to the inflation over here is the removal of Iraq's oil from the marketplace, which is arguably intentional on Cheney's part. It's this destruction which prevents enough wealth from being created to repay the banks without the need for cash.
3) The FED can keep making more loans than the interest on it's previous loans collects, so more and more repos in circulation can increase the money supply over the short term. And they can take riskier assets as collateral. They've been doing both.
That said, there are opinions to the contrary that the current collapse will paradoxically result in deflation. That's what happens when defaults pile up and the FED is eventually repaid over time -- money evaporates because that chain of loans starts to unwind. However for the former to happen we'd have to create wealth (non-consumable product or a sustainable supply of consumable product) to cover the defaults, and for the latter to happen the FED would have to start behaving itself and raise rates.
So the best advice is always to diversify your investments so when one section collapses you can sell from a well performing part of your portfolio to cover the loss by buying in again at a lower price after the crash. Don't invest all of it in gold or precious metals. In addition, do keep in mind that you cannot eat gold. It has always held value but it's an entirely cultural phenomena that it is considered valuable and not just a shiny rock. That could change rapidly if society finds itself under so much stress. Other solid property can be more stably valuable, it is just harder to store is all. I recommend canned food, vitamins, certain medical supplies, and tools. Things that keep for a long time and which you will eventually use or can sell to someone that has a use for them, but things from industries unlike computers where moores law isn't making them obsolete every several years.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
