I Imitate President Herbert Hoover

So people ask me, they say, Karl, you’re a smart guy (not really), what’s with the exploding stock market and all this financial doomsday press, are we headed for 1929 or not?

This explanation reduces a lot of complex stuff to a few easy ideas so don’t hold me tightly to this, but it will give you my faithful 5 blog readers, the outline.

In the 1920’s, the banks, governments, corporations and everybody with money held two reserve currencies, the pound sterling and the dollar. At that time, national currencies themselves (more or less) were also backed by gold which was itself — also a reserve currency.

The big currency reset in 1928 (the real reason for the Great Depression) led to several destabilizing trends, most of which today, we don’t have to sweat.

Gold isn’t an alternative currency anymore (where wealth went in those panics, with horrible results) and other than the Euro and now the emerging Yuan, the dollar is still not only the dominant reserve currency, neither it or any other modern reserve currencies like the Euro, are based on gold or other problematic (commodity) valuation mechanisms.

So what does this have to do with the stock market?

Well, if you not into Euro’s as a reserve currency because of Greek communism and Russian Putin-ism, and you can’t buy Yuan because it’s not through the SDR acceptance process and other normalization protocols — and you’ve got all the real estate your portfolio can handle — you buy stocks; American equities, companies working, trading, and rooted in the strongest currency in the world, and likely to continue being so.

Even a bad P/E ratio is more optimistic than negative interest or evaporating and collapsing currency values.

The amount of debt in the world is out of whack with the size of the productive economy beneath that debt pile – at the moment – and that is a huge deflationary concern, no doubt, no doubt. Warren Buffett is right about this.

But, for the reason above, I don’t see the dollar collapsing soon.

Where else can the world’s wealth go at the moment?

Advertisements

About karlspain

20 year Newspaperman. Lifelong Inventor. Wrote 2 books so far, working on more. The Revelation, 1st book, about your brain & the universe, and math. Hooked together! God I trust, America I love, 2nd book, is the biography of Aris Mardirossian, a great man. Also owned a software company, an IT integration company, a gas station and a fuzzy logic software title along the way.
This entry was posted in Economics, Predictions and tagged , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s