What is wrong in the Western Economies?

Discussion in 'Business & Economics' started by soullust, May 18, 2010.

  1. Me-Ki-Gal Banned Banned

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    You would be surprised at how regulators take looksies at all de loans . When it comes to trust accounts and the like,,,, scrutiny abounds big time . If Ts and I's are not crossed look out cause it can bite you hard in the future. Things don't just go away . You would be surprised what you can learn from a credit report , tittle report , Deeds of trust and the likes . You can piece together a pretty good history of peoples over all lives pretty quick . Know when they was fighting with there wife , or screwing over a friend or family member .

    Audits are no fun even when you think you did everything right . There is good reason why Tittle companies are owned predominantly by Attorneys. You got to be smart mo fo to wade to legal system of regulations to heavy for the " Normal Person to begin to comprehend
     
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  3. cosmictraveler Be kind to yourself always. Valued Senior Member

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    But at least the banks aren't making bad loans any longer are they? Or should I say they aren't being caught making them. I'd rather not make any loans if all who were looking to make them were people who couldn't afford them to start with because they probably wouldn't ever pay anything back and just run away with the money.

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  5. Pinwheel Banned Banned

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    Are you tring to insult me?

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    I'm not a banker.

    Are you a retard?
     
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  7. scheherazade Northern Horse Whisperer Valued Senior Member

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    Interesting to follow the chat. I started a thread on this topic a couple of years ago elsewhere. Here is my opening post from that time as it rather speaks to the issue of money and the interest on that money, which comes from where precisely?

    It's All About The Money

    "It's All About The Money", or currency equivalents when it comes time to negotiate a new union contract.

    A recent survey at the work place listed the following as the top three items of interest:

    a) Wages
    b) Health Benefits
    c) Vacation Time

    In essence, people want to work less, but receive more.

    So, by what means are we to come up with a formula which balances same?

    Money is a mental construct. It has no value but that which we assign to it. Our current financial model was designed to address the needs of it's time.

    It is becoming evident that it is time for a new model. My purpose in posting this thread is to generate some discussion on what those new models might look like.

    Criticism is incredibly easy. I task the reader with doing some actual work in suggesting alternatives that might provide a solution.

    What models do you see as being viable for leading us into the future?

    Regards,

    Labelwench


     
  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    A large part of the answer to the thread's question is here:

    http://www.sciforums.com/showthread.php?t=102598, which might be summarized as:

    "Too much democracy and freedom combined with too little civic and economic education"

    The Dow dropped more than 500 points today, which is not especially important but is an indicator of some of the economic problems in both US and Europe. - Lands where the elected governments attempt to give the voters what they want - more consumption now, with the cost to be paid later. I.e. "kick the can down the road" solutions to finance problems at least as long as one can; however, it now appears that the end of the road is becoming visible, so even that "solution" is failing.

    Those who can do the simple math of compounding interest know the point of no return has been past - the growing debts can only be paid with less valuable fiat money. ("Monetizing the debt" is the euphemism used for paying your debts by short changing the lenders) Those with money to lend, generally speaking, are not stupid and even the bankers know they must charge high interest rates to not lose purchasing power by lending money.

    Yet today, interest rates paid on US Treasury bonds hit an all time low! This is due to two things - (1) The "less ugly effect" that makes the ugly dollar look attractive compared to the even uglier Euro. AND (2) Habit, group thinking, or the greater fool theory. I.e. Always in times of economic stress, the safest place to "park money" was US Treasury paper. - Common "horse sense" (neglecting the fact that horses, led safely out of a burning barn, will rush back the "security" of the stall and die in the flames.)

    -------------
    As scheherazade correctly states:
    "Money and our current financial system were designed to meet the needs of its time."" {not an exact quote, more of a summary}

    However, I don't he is acknowledging that barter became impractical as transportation improved and goods were traded between ever more distant regions. Gold and silver became the means of exchange OR "money." Soon, certificates of owner ship of gold (and to lesser extent silver prior to English domination of world trade) settled trade accounts and became "money." It did not take long before the respected issuers of these certificates learned they could issue more than were backed by the gold and silver they had. I.e. get goods and services for mere paper that had become accepted as "money." Eventually even the pretense that there was gold or silver backing for money was dropped and fully "fiat money" was born.

    This evolution to fiat money was necessary as the global economy had grown to such a great extent that there simply is not enough gold and silver to back the money needed for the operation of the world's economies.

    Money is essentially a promise that it will be worth approximately what it is today at some not too distant future time. Because of what is discussed in the above link, more than 100 years ago, and now the low cost of "printing" (electronically usually) fiat money that promise is increasing recognized as having been broken. It is not money, not even fiat money, but the breaking of the promise of money that is the fundamental problem, but as noted 100 years ago, the people want to consume now and pay later. I.e. at the request of the voting populations the promise inherent in money has been broken by the will of the voters in the western world.

    For those old enough to remember, the sage of the swamp, Pogo, put it well: "We have met the enemy and he is us."

    This, perhaps more than anything else, is why the future belongs to China where the government tells the people how much money there will be, instead of the people telling the government how much money to print. I.e. China, without democracy, can if it chooses; keep the promise inherent in money, but the democratic west can not.
     
    Last edited by a moderator: Aug 5, 2011
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Pogo daily strip from Earth Day, 1971:

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    Initially mainly of environmental validity, but now even more true in economics. - Read post 65.

    Next day, by edit, for record of the losses:

    Thursday. London's FTSE 100 declined 3.5 percent to 5,393.14 and Germany's DAX shed 3.8 percent to 6,172.00. France's CAC-40 lost 2.5 percent to 3,238.80. Wall Street / DOW had 512.76-point fall, the steepest point decline since Dec. 1, 2008. S&P 500 futures fell 0.6 percent to 1,191.7. Japan's Nikkei 225 stock average slid 3.7 percent to 9,299.88 and Hong Kong's Hang Seng dived 4.3 percent to 20,946.14. China's Shanghai Composite Index lost 2.2 percent to 2,626.42.

    How far down the road to Collapse City, do you think QE3 (by some new name) can kick the can and still not enter the city limits?
     
    Last edited by a moderator: Aug 5, 2011
  10. nirakar ( i ^ i ) Registered Senior Member

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    Responding to the thread tittle, not the thread:

    """""""What is wrong in the Western Economies?""""' !!!!!!!!!!


    "The Western Economies" ( USA, Europe and Japan ) have overvalued currencies. There is nothing else wrong with the Western Economies but this currency overvaluation problem is very very serious and leads to trade deficits, outsourcing, unemployment, wasted production infrastructure and wasted skills.

    Westerners may not have as good an attitude towards hard work as less privileged people do but mostly the problem is just that incorrectly priced currencies results in non-Western people being willing to do equally skilled work for less money.



    Western is not the right word for Japan, maybe "mature economies" would be a better phrase. Canada and Australia are a bit different from the other mature economies because they have such great ratio's of natural resources to people.
     
  11. elte Valued Senior Member

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    Animals tend to make themselves as big collectively with respect to the rest of the world as they can. That leaves them overwhelming their environment. If people could basically stop reproduction for long enough to get the numbers down to some small figure, we might be able to approach our lives on the planet in a much more comfortably sustainable way. It is rather sad to even have to propose that because, ideally, everyone could live forever, and here is the catch, then there'd be no place for reproduction. It's a sad situation, and it boils down to making a bad thing as good as possible, overall.

    A way to do as in the first sentence above is to have a small population but with very high mobility for each individual. That effectively shrinks the relative world size for fewer total people, placating the innate drive for the species to dominate the globe. A scenario for that could involve a total population of half a million people, but with each person having an airplane.

    So, what's wrong with nations with mature economies? The population of the planet is so high that the pie slices thin down to almost nothing slivers once the global masses finally can get a piece. That means those advanced economies have to have ever shrinking slices of pie.
     
  12. United for Communism Marx & Lenin Forward Registered Senior Member

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    Capitalism is the problem.
     
  13. elte Valued Senior Member

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    Capitalism is seriously problematic because its very basic notion is ethically lacking. A friend was discussing such matters with me and he seemed to understand. He pointed out the philosophy of the Dune writer, Herbert, which I was surprised to learn seemingly closely matched my own--that the way our civilization tends to justify the notion of competition against others to basically hurt or destroy them is alarmingly akin to participants being encouraged to be criminals if not ultimately attempted or effective man slaughterers.

    Unfortunately, even if governments outlaw capitalism and declare that the new system will be like the one the early christian community adopted, things tend not to improve much, if at all. People seem to lose motivation to work once that particular competitive pressure is removed, though there are exceptions. This isn't a problem with such classic communism but rather it is a problem with people's education, which in turn, instills in them a bad attitude or general philosophy.

    How to fix this attitude involves teaching people a new way to see themselves (ourselves) in the universe. Why are we thinking of ourselves in competition against others when there is a deadly opponent taking each one of us down. We fight against each other while forces in nature are blindsiding everyone of us. Adopting the attitude of fighting against harmful things of nature instead of against other people is key to any economic system working better, regardless of its name.
     
  14. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    A tax code that lets the super rich legally* pay lower fraction of their income in taxes than their barber does, for one thing. Warren Buffett agrees:

    “ … Billionaire Warren Buffett urged U.S. lawmakers to raise taxes on the country's super-rich to help cut the budget deficit, saying such a move will not hurt investments. "My friends and I have been coddled long enough by a billionaire-friendly Congress. It's time for our government to get serious about shared sacrifice," the 80-year-old "Oracle of Omaha" wrote in an opinion article in The New York Times.

    Buffett said his federal tax bill last year was $6,938,744. "That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income—and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent, and averaged 36 percent," he said.

    Buffett said higher taxes for the rich will not discourage investment. "I have worked with investors for 60 years and I have yet to see anyone—not even when capital gains rates were 39.9 percent in 1976-77—shy away from a sensible investment because of the tax rate on the potential gain," he said. "People invest to make money, and potential taxes have never scared them off." …” From: http://www.cnbc.com/id/44142272?a=1

    Billy T comment: all true, and patriotic of him to state these facts, but still is ignoring that where the super rich invest is in Asian, not the US.

    I.e. “trickle down” job creation makes jobs in Asia and closes the old and less competitive, higher-wage-cost, US factories. That is why I advocate an “export of funds” tax – something like a sum sent to the IRS equal to any amount more than $10,000 sent out of the US. ($10,000 is not arbitrary chosen value – that is how much you can take out in cash in your pocket when you get on an airplane without any need to declare it. – It allows tourist to have cash in Europe etc. or me to have funds to spend in Brazil. I am not just speaking of green cash. If a tourist spend $15,000 by credit card in Europe, his US tax bill would go up by $5,000 too.)

    For example, if Buffett’s investment in expanding BYD motors cost him $1,000,010,000 (essentially one billion dollars) to gain 10+% ownership of BYD motors, then he should have been required, IMHO, to send $1,000,000,000 to “Uncle Sam” (IRS) to help cover the cost of re-training workers in Detroit’s closed auto factories and the un-employment insurance they collected.

    If that were the law, then perhaps building or expanding a job creating factory in the US might have been his choice. Detroit no longer sells luxury cars to China’s rich as it once did. They now buy luxury cars made in China, some by BYD motors.

    ---------------
    * And many have lawyers and accountants who show them how to "bend the law" to avoid huge amounts of taxation. I have read that Greece collects less than half the tax that is legally due. Note people like a school teacher cannot hide their salary income, but the owner of a billion dollar annual income shipping company can and does.

    SIMPLE SOCIAL JUSTICE REQUIRES THAT THE SUPPER RICH PAY AT LEAST THE SAME PERCENTAGE OF THEIR INCOME THAT THE MIDDLE CLASS DOES. Unfortunately in the US they, like Warren, pay only about half as high a fraction. Few Republicans want to change that. Why?
     
    Last edited by a moderator: Aug 15, 2011
  15. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Perhaps this is part of it:

    "... Gisele Bundchen and Tom Brady have been named the world's highest-earning couple. The supermodel and her NFL player husband earned a staggering $76 million (NZ$90.9 million) between them during the period May 2010-2011, with the Brazilian beauty's fashion career, endorsements and business deals bringing in a $45 million share of their joint income. According to Forbes magazine, Beyonce Knowles and Jay-Z earned just $4 million less in the same period, ..."

    From: http://www.nzherald.co.nz/entertainment/news/article.cfm?c_id=1501119&objectid=10747106

    Billy T comment: I read about their 76 million dollar top income of a couple in my Brazilain newspaper, but found this NZ link to it in English.

    That is a lot of money for two people who simply have well developed bodies. That probably is not fair comment as I bet both are smart. (Giesle, must be as a few years ago I also read in my local paper that She would no longer accept salary / fee payments in dollars - wanted Brazilian Real.)

    In more direct answer to thread's question - as reflected in these incomes - too much money is being spent on nothing with any lasting value, while US infrastructure falls apart, e.g. trains must go slower than they can (which is only half the speed of Chinese trains) as sections of the tracks are not safe for higher speeds, education in US produces lower math and science knowledge than most other "advanced nations", Many cities lose half their processed drinking water via old and leaking pipes, etc.

    As they say "You get what you pay for."
     
    Last edited by a moderator: Jan 11, 2012
  16. elte Valued Senior Member

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    snip
    Indeed, the lack of the public's understanding is a real problem that threatens the economic system's future. Another is the widespread inability to come to grips with difficulties in keeping energy cheap. Long term rising energy costs will limit long term prosperity most directly of all the influences.

    People seem to not to understand that the unemployment that is being talked about so much is a symptom of too many people trying to tap dwindling natural resource supplies. It's why Egypt and other desert Arab states are in dire straights.

    http://www.sciencedaily.com/releases/2012/01/120126223609.htm
     
  17. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Answer: They borrow to spend on things of little lasting value (hoop hoops, chemical glow lights, etc.). China sells, getting funds, to invest:

    "... China began to recognize that their savings were losing value in real terms. Beginning in 2007, they made the strategic decision to protect themselves from inflation by diversifying out of US dollar-denominated financial assets, and into the hard assets she required to grow her economy.

    The volume of deals has been breathtaking, and the tempo is accelerating.
    {year by year, 2007 thru 2011 details were here.}

    All told, {since 2007}the Chinese have spent $443 billion in nearly 400 separate ventures in every continent around the world. ... Chinese priorities are glaringly obvious. Over the past few years, they have deployed fully 80% of their cash into just four sectors: Energy (the lion's share at $172B or 39% of the total), Metals ($85B or 19%), Transportation ($60B, nearly 14%), and Power ($38B, just under 9%).

    By geography, the Chinese first went shopping in Asia, picking up $115B worth of assets in their backyard. Then, choosing to ignore the niceties of international sanctions, the Chinese turned their attention to Africa and the Middle East, where they have plunked down at least $111B of capital. After that, they came to our front door in the Western Hemisphere, to the tune of $88B. Europe is home to $52B of Chinese capital. Australia is the largest single country investment, representing 10% of investment at $43B.

    And they're not done yet. According to recent media reports, the Chinese are currently planning to deploy another $300 billion into "aggressive" investments. ...

    In addition to its massive disclosed investments, China has begun to execute a parallel strategy in secret. With respect to gold, China kept a large scale purchase program under wraps for a full five years... Then, in April of 2009, they publicly announced that they had acquired 500 tons of gold, and transferred it to the People's Bank of China. At current market prices, this single transaction is valued at nearly $28 billion. ..."
    {and about 500 tons in just last year - buying gold is accelerating for the world´s largest gold producer. WHY? I have told why in several posts over last few years.}

    From Peter Schiff´s Email to me today.
     
    Last edited by a moderator: Feb 28, 2012
  18. Sorbonne Registered Senior Member

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    12
    I have just come on this board and browsed through this thread. The most obvious problem with the comments is that they seem to confuse

    1] the distribution problem

    with

    2] the full employment or macroeconomic control problem.
     
  19. elte Valued Senior Member

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    From what I've picked up, things are gloomy looking partly due to greed. In the older days, that pretty well explained it because (approximately several decades ago) the world had just about 1/3 the number of people it has now. The earth's resource tapping, especially fossil fuel that powers modern civilization, was pretty much in relative infancy. Now things are getting more and more determined by the principle involving the yeast in the grape juice scenario.

    http://cluborlov.blogspot.com/
     
  20. Sorbonne Registered Senior Member

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    Things are booming in China and Australia.

    Most of the world is in recession as part of the debt induced Global Financial Crisis. The world will climb out of it.
     
  21. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Answer: they are governed by "TV-pretty faced" lawyers elected by corportate funds:

    "... for a sampling of corporations' lobbying activity, according to the Center for Responsive Politics:

    General Electric (NYSE: GE ) spent $26.3 million, with a lot of activity related to defense bills -- for example, pushing for an alternate engine for the F-35 Joint Strike Fighter that GE would have built and had estimated as a potential $100 billion market.

    ConocoPhillips (NYSE: COP ) spent $20.5 million lobbying on tax issues related to the Close Big Oil Tax Loopholes Act (defeated 52-48 in the Senate last May), among other items.

    AT&T (NYSE: T ) spent $20.2 million on an agenda that included nudging legislators to push through its attempted merger with T-Mobile, which failed last December.

    Comcast (Nasdaq: CMCSA ) spent $19.2 million concentrating on the Protect IP Act and Stop Online Piracy Act, although this cash failed against the large virtual uproar from Internet users.

    Boeing (NYSE: BA ) spent $16 million, predictably on efforts to influence defense spending, but also on the Securing American Jobs Through Exports Act of 2011, which aims to re-authorize the Export-Import Bank through 2015. Boeing just inked a $740 million deal with the bank that allows Boeing's suppliers to receive early payments on invoices.

    With so much money floating around politicians, it's difficult to see how the system could change. However, Grantham points to northern Europe as an example to follow; there is a reason why Denmark, Finland, Sweden, Norway, the Netherlands, and Switzerland all fall within the top 10 least corrupt countries in the world.

    And to buffer corporate influence on politicians, Grantham says politicians themselves need to have higher qualifications, especially in science. Whereas "eight of the nine senior leaders in China's government are scientists," Grantham notes that "of our 535 Congressmen and the President and Vice President, less than a handful -- arguably only two or three -- would pass the test." ..."
    From: http://www.fool.com/investing/general/2012/03/08/how-to-fix-capitalism.aspx
     
  22. Michael 歌舞伎 Valued Senior Member

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    I wonder what society would be like if we had competing currencies with interest rates set by market forces? I wonder if people would vote for all this bullshit they vote for - if THEY had to pay for it, and not leave it for their children or grandchildren? If they had to feel the pinch?

    There's nothing inherently wrong with Capitalism in a free-market. It's morally neutral. You use your capital to invest, loan or spend. Pretty simple really. The problem is YOUR currency is being manipulated to f*ck you over. You're wealth is (nearly) trapped in USD and the Banksters have special privileges that allow them to create more of it out of thin air causing inflation - effectively stealing your personal wealth. Prior to the Central Bank cartel we had regular deflation as things became cheaper to produce. Life was relatively good for most Americans. Within a decade of the Federal Reserve we had the worse Depression in our history. Not only that but the government has the God Damn gall to TAX you of your own wealth! Which would see the Founding Fathers rolling in their graves. Finally, to rub salt in your eyes, they sell you and your children's future labor to the Chinese et.al. through bond auctions. At the end of the day, something has to back up all those USD - that's mainly oil. So, to keep the whole ponzi scheme working they send you off to fight and die in bullshit wars on "Terror".

    As society moves AWAY from Free Market Capitalism and towards "Socialism" it must at the same time reduce informational unknowns which means reducing your freedoms. The government just spent a Trillion dollars on TSA fingering your anus. That's what life is like as things socialize. You're so dumbed down you just bend over and take it in the arse.



    What's wrong with Western Economies? Mainly the Cattle that make up the society. The have almost no idea about anything that's going on around them. They watch the idiot box, nod, and eat their grass.
     
    Last edited: Mar 17, 2012
  23. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    The problem is stated in your second sentence. Having only dollars used in US is not a problem, but having them accepted as more than green paper all over the world is, as that is starting to end now.

    If you don´t want to have your wealth in dollars, there are many other choices. More than 5 years ago, I posted that one should be buying Brazilian ADRs. Although these are priced in dollars, they are partial ownership of Brazilian assets (companies, mines, oil, soy bean farms, etc.) which are priced in Brazilian Real. Even it the asset does not increase in Real, as the dollar declines when you sell the asset (the ADR) you get more dollars for it.

    For example, when I moved to Brazil nearly 20 years ago, Brazilian inflation was terrible. A kind employer would give you some time off on AM of pay day so you could run to the store and spend it all, before the merchants could mark up yesterday´s prices by 1 or 2%! I had dollars and everyone wanted them for the stable value - ironic is it not that now no one in Brazil wants them as the Real is more stable in its purchasing power.

    Back then it was good for me - I paid by check, in dollars, $23,000 for ~100 acre run down pasture with two small (two bedroom) houses on it and a lake with fish of several acres a damned-up stream made. (I strongly suspect the check was part of the laundry of drug money as I was told not to fill in the "pay to" line, but to leave it blank.) That was when on the "grey market" (A not legal, I think, but never bothered black market, with currency exchange at same address for years.) rate was about 4.5 Real per dollar. 10 years later when I sold farm rate was nearly three times better for me as Brazil´s inflation had ended. I.e. if I had wanted dollars, I could have had >$60,000, but of course I, like everyone else, then was trying to get rid of dollars for Real.

    This just to illustrate that ADRs resold, like the farm can give more dollars than you paid for them earlier, even if the company of the ADR is not increasing in value, but most Brazilain companies are rapidly growing in value, in Real. (You gain both ways.) - I.e. protect you from the decline in the value of the dollar. Also while owning the badly over grown abandoned pasture I spent about $3,000 on plowing and seeds. When bought farm there were ~10 very scrany cows on it. They used up so much energy climbing up and down the hills looking for grass to eat, that they gained no weight. When I sold it I sold 50 fat steers, and they alone (priced in dollars) gave me twice what I paid for the farm.

    All told, my DOLLAR profit on $23,000 invested for ~10 years was ~$100,000, but I was very lucky on my timing. - You can´t do that now in Brazil or India, except with extreme luck, but you can, I think, at least protect your wealth and grow it modestly with well chosen (or even just average) ADRs. You probably can repeat my gains in Turkey or Indonesia, etc. but with more political risk.

    SUMMARY: Protection against dollar decline is easy - own assets in another country with appreciating currency, even via NYSX traded ADRs you buy in dollars.

    You have miss diagnosed the problem. A unique currency is not it, That is a great benefit for commerce. Here is the problem:
    That has destroyed Greece and is doing same for US in two more years of 1.5 trillion dollar annual deficities. Problem is not the FED, nor the ECB, nor the governement, nor single currency and only partly the lobbyists and their bribes. Pogo, the sage of the swamp, stated the problem very clearly - see post 66. I.e. "WE HAVE MET THE ENEMY, AND HE IS US."
     
    Last edited by a moderator: Mar 17, 2012

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