Extacy of Gold

Gold doesn’t have the capacity to do anything that the Federal Reserve Bank can do to regulate inflation or deflation. Gold doesn't allow money supply to keep up with money creation, which is what happens in a sound economy. Gold is a limited supply commodity that is finite. It won't reach to cover the United States economy and there ain’t a prayer that it can cover the world's economy. Deflation has economic problems that can be just as bad as inflation. If we tried to use it as our currency, we would have massive deflation. Massive deflation leads to money hording rather than investing and banks can’t lend because the value of things are going down. Deflation is mostly associated with depressions.

Let me explain. Remember when real estate was the only sure bet investment? It had real… estate value. You could pass it down to your children. You could live on it, or in it. It had physical size and was tangible. However, its value went up and up and up, far beyond its real affordability. Why? How?

See below...

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So many bubbles, so little time

Here is what Sen. Obama's Rasmussen numbers look like

This is an update to an earlier diary
http://www.mydd.com/story/2008/3/26/1332 3/5146

For an excellent primer on how bubbles form and collapse, I recommend this article from an excellent blog on the housing market (since this is the most recent example of a bubble)

http://www.irvinehousingblog.com/2008/03 29/efficient-markets-vs-behavioral-fina nce

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The Politics of a Bubble

I am sure you have all heard of the housing "bubble" which is now collapsing.  You are probably also aware that there was a huge runup in the housing market from 2000-2007, and that this runup was  preceded by another collapsing bubble.

If you are into stocks, you are probably aware that AAPL used to trade at nearly $200, but is now at around $120 (and that AAPL used to trade at $50 not too long back).  You are probably aware of similar bubbles that have formed and collapsed in many other stocks.

Decisions having to do with buying and selling are made by rational people (one hopes, at least).  So why would any rational individual  have bought a house in June 2007, when all signs were pointing to an imminent collapse.  Why would anyone have bought CISCO stock in March 2000 at $ 78 (as I did), just prior to the imminent collapse which was quite expected.

And does that hold any lessons in politics ?  

The answer is quite simple really: humans are like penguins, and yes, it holds a lesson in politics.

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Obama Bubble

Der Spiegel, the German magazine, has an excellent article comparing Obama's rise to rise of the dot.coms.

"The rise of democratic frontrunner Barack Obama signifies an alarming victory of style over substance. Not unlike the dot-com hype, his campaign promises more than he can deliver. The one thing his voters can count on is that they will ultimately be disappointed."

Here is the full article: http://www.spiegel.de/international/worl d/0,1518,536232,00.html.

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Diaries

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