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Minyan Mailbag: Is There a "Glass Half Full" Thesis?


market forces will take over at some point

Prof. Succo,
The more reading and thinking I do about our monetary predicament the more I come to the conclusion that the only possible endgame is a worldwide currency collapse and a return to the gold standard. I don't know how many years it'll take, but I feel it'll happen in my lifetime. Housing's overvalued by 30%? No problem, the Fed will just grow M3 at 9% a year for 3 years and that'll take care of it. Same thing with stocks. When Cheney said "deficits don't matter," he obviously meant they don't matter in politics, that the public doesn't hold the government accountable for them (unlike recessions and unemployment). Likewise, the public doesn't seem to care about the value of the dollar as long as stocks and real estate priced in dollars maintain their value. Just as it took decades to train the public into thinking money is paper instead of gold, it might take decades more to get them to fully realize their paper is ultimately worthless (although I imagine the last several months of this realization will be something to behold). It's why the only reasonable long-term investment I can think of right now, even with your deflation thesis, is gold, because I consider the inflation/currency risk part of any long-term investment decision far more important than the growth part. Is there even a "glass half full" thesis for people who understand the situation? I know I'm preaching to the choir here, but just sharing my frustration of the game with people who understand.
Minyan Conor

This is what I mean when I say that market forces eventually, despite central bank hubris that they can control markets (and maintain huge economic imbalances), will take over at some point and destroy these imbalances.

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