Have U.S. Stock Prices Repealed The Law Of Gravity?

BubbleWe have read in the last few days, that the world’s billionaires are buying up a lot of gold bars and now, that they are hoarding cash. We add to that: “He wo has eyes to see, let him see.”

In 1933, President Roosevelt closed the failing banks for a “bank holiday” that left a lot of people scrambling. In 2008 President Bush covered the failing banks with Fed cash via the “TARP” program; he didn’t therefore have to close them. But next time, since we’ve already overused that gambit, it won’t be available. So the availability of banking shouldn’t be taken for granted these days as the billionaires are, by example, advertising.

It is beginning to seem wise to have some cash on hand, a couple of weeks’ worth at tleast. Unadvertised, of course in these days of home invasions. Given that we can’t expect to earn any useful amount of interest (Gracias, Federal Reserve) we might as welll store it in a mattress anyway.

Re the gold bars: President Roosevelt confiscate all the gold (except coins) at his artificially set, inflated price. Billionaires may store such things in Switzerland or under convenient alias; most of us will be subject to any confiscation that comes along. But most of us can’t afford too many gold bars anyway. Anything that may retain value as the dollar inflates should do.

See, we’ve been watching the stock market in New York. Stocks are supposed to represent the market value of businesses, right? But we note that businesses have been taking on debt, laying off people and leaving for China; we don’t see how their value can have been skyrocketing upward unless they are Apple. But they have, skyrocketed upward, that is. The New York S&P stock index is in the stratosphere.

When the market value of business stocks shoots up while the business itself isn’t setting the world on fire, that’s telling us something: the puffed-up values contain a lot of hot air. At some point, that air will cool and leak out, leaving only the value of plant, inventory, workforce etc. behind. When it happens to a bunch of businesses at once, it’s called a stock market collapse. We famously saw that in 1929 and more recently, in 2008. We didn’t much care for it either time.

Stock markets setting new records for high stock prices when the real businesses haven’t been doing so wonderfully are prime candidates for such collapses. The trick is dating the event. Our theory today is that watching the world’s billionaires taking in their sails and preparing for a blow suggests that the date isn’t too far off. Of course, we don’t know what we’re talking about. Maybe we should put on our tinfoil hat? Or maybe we should stuff a few big bills under the mattress. We dunno …

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About Jack Curtis

Suspicious of government, doubtful of economics, fond of figure skating (but the off-ice part, not so much)
This entry was posted in Capitalism, Debt, Economics and tagged , , . Bookmark the permalink.

4 Responses to Have U.S. Stock Prices Repealed The Law Of Gravity?

  1. If you don’t want to sail into a rock it pays to look ahead. Watching the billionaires is a good idea, but I expect they will have lightning reflexes where it comes to pulling up the drawbridge. Besides they apply rules to us which aren’t applied to them . As the mirage of money fades before our eyes reviving barter schemes seem like a good idea. Also hard for the taxman to insist his share is for you to mow his lawn. A few years back I noticed that the buying power of £1 had dropped to 80pence in a few years. Over the same period the price of a can of corned beef had risen from 80pence to £1.50. So if I’d converted my pounds into corned beef I would have enjoyed an equivalent interest rate of about 90percent.

    • Jack Curtis says:

      And unlike the sterling, you can eat the corned beef.
      And your pound is not lonely; it’s taking the dollar, yen and the rest with it …
      A pound of ground beef was recently $4, a new record. Pretty soon, hamburgers and pizzas will have to be transported accompanied by armed security!

  2. Perhaps the police will deliver them.

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