Baseball91's Weblog

November 23, 2008

Money’s Role In The Paperless World

 

Money was the paper I held in money funds, in savings.  Fiat money is the international paper unit that fluctuates through an independent fiat monetary system around the world.  Money was paper.  There is a certain amount of dollar hegemony which is created by the geopolitically constructed peculiarity where, most notably, oil is denominated in dollars.

 

Those products made in China, which 40 years ago were made in Japan were why Americans always felt rich.  It was monetary policy.  Monetary policy was constructed so that the value of currency in China was low to the cost of the product bought in the American store.   I have read that 70% of the economy is based on the American consumer consuming.  And all that now seemed at risk. 

 

“World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world’s interlinked economies compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies.”

–Henry Liu 

 

“The adverse effect of this type of globalization on the US economy is also becoming clear.  In order to act as consumer of last resort for the whole world, the US economy has been pushed into a debt bubble that thrives on conspicuous consumption.”  –Henry Liu 

 

“To prevent speculative and manipulative attacks on their currencies, the world’s central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world’s central banks to acquire and hold more dollar reserves, making it stronger.”  –Henry Liu 

 

Bill Gross, the Pimco’s bond fund king and the best bond fund manager in the world, said “What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August 2007.”

 

This market meltdown started in 2007.  Could money all eventually be worthless?  The Treasury Department’s attempts since July 2008 to take hold of, to attempt to fool the market  was to put the value of currency at risk.  There had always been an invisible trust in currency.  It was how society had worked in my lifetime.  Was currency as a medium of exchange now going to be challenged?  “In this way, the Central Banks of the world could inflate together, create a massive system on a global scale and maintain both political and social controls over the various populations of the world without very much restrain or limitations. The problem, of course, is that they appear to actually believe in the system that they created for these purposes ….herding the population into neat, controllable groups for convenience, taxing and at one time regulating to maintain their political controls.” 

 

In an annual economy in the United States of nearly $15 trillion, an article in Forbes this week cited a commitment so far by the Teasury of $5 trillion to resolve this mess.  

 

“The Chicago School was a movement of economic theory which in recent decades had become an aggressive agent of intellectual imperialism applying its economic doctrines to disciplines such as political science, legal theory, history, sociology, and international relations.  Alarmed by the sharply eroding market confidence in the nation’s two GSEs (Fannie Mae and Freddie Mac), the largest mortgage finance companies, the Bush administration announced plans on Sunday, July 13 to ask Congress to approve a sweeping rescue package that would give officials the power to inject unlimited funds into the beleaguered companies through investments and loans.”  –Henry Liu 

 

Companies which were undercapitalized caused this mess.  Like AIG.  Like each of the 5 investment banks on Wall Street which are no more.  When critics cite the sloppiness of rating agencies in helping to create this mess, banks which relied on credit agencies were too busy to do their own home-work?  How difficult was it to see the undercapitalization of AIG, of any investment bank, which was reaping huge profits?  What had changed about the world that all of these profits looked so easy?  Were there many folks in law enforcement, in Homeland Security, who felt that enforcement of laws should be on a voluntary basis on these shores?  The aroma all along on that end of Manhattan had to reek.  The exposes on Henry Paulson’s role at Goldman Sachs in this credit swap scandal apparently will be written after he moves out of Washington.  With the lack of support of newspapers, an industry that no one has mentioned for bailout, Paulson may be hoping there will not be a newspaper left.   

 

How could valuations be false?  In a sense, were we all suffering the effects of the education of the current age, of all those educated in an American public school system where moral relativism was the prevailing philosophy, not supplemented with some kind of belief in an absolute moral authority, and no one actually believed that all men and women were created equal.  Not based on the compensation allowed by boards of directors.  There was complicity everywhere.  Moral relativism was not contained only on these shores, but the entertainment media seemed to send these wisps to the most remote portions of this earth.  Valuations were changing so fast everywhere.   

 

Could American money all eventually be worthless? The dollar is at a 14 year low against the pound, I heard this morning on the radio.  There was a recent 10% change against the Euro.  Downward.  And it is all related to what is happening here.  Soon we will be told what a good thing this is. 

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1 Comment »

  1. Good post.

    I look at these events as trading opportunities, and anticipate movement, Since I don’t care which way the market moves, I just want it to move and get a crack at whatever movement comes along. I stay away from political hand wringing, and look at their pronouncements as “What’s in it for me:)”

    Welcome to my blogroll. You will probably get some hits.

    Jeff

    Comment by masteroftheuniverse — November 23, 2008 @ 3:13 AM | Reply


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