Sour dough makes the Joneses eat stale bread from Wall Street

You must have read:

https://ikejakson.wordpress.com/2010/05/20/the-day-that-germany-spoke/

Then you must read an older one:

https://ikejakson.wordpress.com/2009/04/01/they-have-to-go-under-if-we-are-to-save-the-world/

Take note, or eat the stale bread.

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2 Responses to “Sour dough makes the Joneses eat stale bread from Wall Street”

  1. Nolanimrod Says:

    The financial world did blow up. You just haven’t seen it in the press.

    When people can’t make money in one sector they will go to where they can. When the Fed keeps the effective interest rate around 0% while housing prices are doubling ever two years or so the money is going to go for weird derivatives.

    During the Carter era, with high rates of interest, inflation, unemployment, and taxation the money went to some stranger places. It was the era of The Collector’s Item. Otherwise sensible people were brandishing bits of outright junk while joyously reciting the mantra, “It’s a collector’s item.” One of the hot “investments” was financing sunken treasure expeditions. Probably emblematic of the era was the fact that the decade’s hottest consumer item was the Pet Rock.

    Now we’re on a different track. One of the things which scared Bernanke etc. was fear of deflation. Deflation can bring down a society because the money becomes more and more valuable. As it does it becomes more costly to get. This is fine if you have some, but what if you owe some?

    If you owe $100 and there’s a deflationary spiral you still owe the $100 but in practical terms the $100 is now worth $1000. If you had trouble paying the $100 you now have no hope of repaying the loan and go bankrupt, which accelerates the deflation. So the next guy who, like you, owed $100, now owes $10,000 in real terms. No way he can cope.

    And so it goes.

    Well, they think they have prevented the financial melt down from causing deflation, but have they?

    We re in a severe inflationary situation but prices haven’t gone up. Five years ago my dollar would buy 1/250th of an ounce of gold. Today it will buy 1/1200th of an ounce. So it’s worth 21ยข compared to what it was worth five years ago. It has lost 79% of its value.

    But prices haven’t gone up. Normally that’s the first thing that happens when currencies inflate. You get the 50 million dollar loaf of bread, as in Zimbabwe. But even with the inflation of the currency prices are still dropping. Foreclosures are up but most housing prices aren’t coming down. Except in Detroit. Bears (the real kind, not investors) are prowling some areas of Detroit.

    So what’s it mean? That the prices of goods are dropping as fast as the value of the dollar? Search me.

    Maybe we couldn’t afford the “affordable housing” after all.

    • Ike Jakson Says:

      Nimrod

      Right now I hope to just get to Monday without a major disaster on the World Stock Exchanges. From now on it is a day to day affair.

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