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February 10, 2008
SouthAmerica: Reply to Ausdaiki
You wrote: âI agree with SA in the perspective that a depression is due; as it is my belief that a depression is a part of the economic cycle and it serves a purpose [it gets fat out of the system].â
Here is in a nutshell the list of reasons why Depressions are part of the long-term business cycles.
I quoting once again from my book:
"Unrealistic Expectations.
There is much evidence that human expectations tend to be linear. Most of the time, most people expect current conditions to continue for the indefinite future. It is almost an unnatural act for a man to leave home with an umbrella on a sunny day. Call it optimism, faith in the future, or just reluctance to see the party end, there is a presumption that the environment is stable. This is why cities are built on floodplains and fault lines. A similar presumption makes the gambler double his bet or the farmer plant additional crops on reclaimed land the year after a good harvest. Whenever prosperity exists, it is natural for people to expect prosperity to continue. For this reason, much of the history of human society is a record of astonishment. Time and again, people have marginalized their affairs, rendering themselves increasingly crisis-prone.
They have gone into debt, extending claims on resources to an extreme that could be supported only if current conditions were sustained uninterrupted into the future. Time and again these hopes have been disappointed. Whenever prosperity has seemed permanent, some apparently minute change could produce astonishingly large nonlinear shifts in the organization of human society. The failure to recognize or anticipate these nonlinear transformations has been a common characteristic of almost all societies.
â¦When the dynamic and nonlinear world adjusts itself to the linear thinking used daily by governments and other institutions such as corporations, banks, insurance companies, the church, and so on, the result can be sometimes catastrophic and can translate into unemployment, inflation, monetary devaluations, market crashes, world wars, civil wars, depressions, and even chaos.
â¦Change is a fact of life, yet many people don't want to think about it because they feel threatened by it. So when change comes, it takes them by surprise. By then they can only react to it, and unless they're lucky, they suffer losses."
********
Since the end of the last depression many things happened along the way, WW II, the Korean War, Vietnam War, dozens of civil wars around the world, stock market ups and downs, major financial scandals such as the savings and loans mess of the 1980âs, Enron, Worldcom, dot.com meltdown, Citigroup scandal, hedge funds scandal, sub prime scandal, people invested in real estate and inflated it like a bubble such as in Japan in the late 1980âs, or the United States in the last few years, various international monetary crisis in the United States, Russia, Asia, and Latin America to mention just a few, we also had major natural disasters such as earthquakes, at least 20 major hurricanes including some major ones as Katrina, most major corporations usually they play around with their numbers (they carry as assets stuff that they know are garbage and eventually they have to right them off, or they keep giving misinformation to people to keep investors interested on their corporations) basically the list can go on and on, and that is why Depressions are necessary for the entire system to be able to deflate and adjust itself, and find a new equilibrium â and the value of most things come down to a more realistic price.
People lost trillions of US dollars during the dot.com fiasco, in the first 3 weeks of 2008 about $ 5 trillion US dollars went up in smoke around the world in the stock markets, eventually these losses have to catch up with the real world.
That is when things that are completely out of balance collapse and everything is readjusted accordingly to a new level that reflect the changes of a dynamic system that has changed things around over time. For example: The United States had a good run in the last 50 years and it was able to monopolized the international monetary system with the US dollar â resulting in a system that today is becoming a major mess â and you donât need to be a rocket scientist to figure out that we are very close to the end of this US dollar advantage.
Today, the entire international monetary system is on the edge of the biggest international monetary crisis the world has ever seen. The fuse has been lit.
Besides all the things that I mentioned above this time around the fuse that has been lit it is called DERIVATIVES and eventually they are going to go off just like a nuclear weapon and it will be a devastating event for the entire global financial system.
A nuclear explosion on the DERIVATIVES market it will be the trigger for the entire house of cards to come down â resulting on the first great depression of the new millennium.
.
February 10, 2008
SouthAmerica: Reply to Ausdaiki
You wrote: âI agree with SA in the perspective that a depression is due; as it is my belief that a depression is a part of the economic cycle and it serves a purpose [it gets fat out of the system].â
Here is in a nutshell the list of reasons why Depressions are part of the long-term business cycles.
I quoting once again from my book:
"Unrealistic Expectations.
There is much evidence that human expectations tend to be linear. Most of the time, most people expect current conditions to continue for the indefinite future. It is almost an unnatural act for a man to leave home with an umbrella on a sunny day. Call it optimism, faith in the future, or just reluctance to see the party end, there is a presumption that the environment is stable. This is why cities are built on floodplains and fault lines. A similar presumption makes the gambler double his bet or the farmer plant additional crops on reclaimed land the year after a good harvest. Whenever prosperity exists, it is natural for people to expect prosperity to continue. For this reason, much of the history of human society is a record of astonishment. Time and again, people have marginalized their affairs, rendering themselves increasingly crisis-prone.
They have gone into debt, extending claims on resources to an extreme that could be supported only if current conditions were sustained uninterrupted into the future. Time and again these hopes have been disappointed. Whenever prosperity has seemed permanent, some apparently minute change could produce astonishingly large nonlinear shifts in the organization of human society. The failure to recognize or anticipate these nonlinear transformations has been a common characteristic of almost all societies.
â¦When the dynamic and nonlinear world adjusts itself to the linear thinking used daily by governments and other institutions such as corporations, banks, insurance companies, the church, and so on, the result can be sometimes catastrophic and can translate into unemployment, inflation, monetary devaluations, market crashes, world wars, civil wars, depressions, and even chaos.
â¦Change is a fact of life, yet many people don't want to think about it because they feel threatened by it. So when change comes, it takes them by surprise. By then they can only react to it, and unless they're lucky, they suffer losses."
********
Since the end of the last depression many things happened along the way, WW II, the Korean War, Vietnam War, dozens of civil wars around the world, stock market ups and downs, major financial scandals such as the savings and loans mess of the 1980âs, Enron, Worldcom, dot.com meltdown, Citigroup scandal, hedge funds scandal, sub prime scandal, people invested in real estate and inflated it like a bubble such as in Japan in the late 1980âs, or the United States in the last few years, various international monetary crisis in the United States, Russia, Asia, and Latin America to mention just a few, we also had major natural disasters such as earthquakes, at least 20 major hurricanes including some major ones as Katrina, most major corporations usually they play around with their numbers (they carry as assets stuff that they know are garbage and eventually they have to right them off, or they keep giving misinformation to people to keep investors interested on their corporations) basically the list can go on and on, and that is why Depressions are necessary for the entire system to be able to deflate and adjust itself, and find a new equilibrium â and the value of most things come down to a more realistic price.
People lost trillions of US dollars during the dot.com fiasco, in the first 3 weeks of 2008 about $ 5 trillion US dollars went up in smoke around the world in the stock markets, eventually these losses have to catch up with the real world.
That is when things that are completely out of balance collapse and everything is readjusted accordingly to a new level that reflect the changes of a dynamic system that has changed things around over time. For example: The United States had a good run in the last 50 years and it was able to monopolized the international monetary system with the US dollar â resulting in a system that today is becoming a major mess â and you donât need to be a rocket scientist to figure out that we are very close to the end of this US dollar advantage.
Today, the entire international monetary system is on the edge of the biggest international monetary crisis the world has ever seen. The fuse has been lit.
Besides all the things that I mentioned above this time around the fuse that has been lit it is called DERIVATIVES and eventually they are going to go off just like a nuclear weapon and it will be a devastating event for the entire global financial system.
A nuclear explosion on the DERIVATIVES market it will be the trigger for the entire house of cards to come down â resulting on the first great depression of the new millennium.
.