Edge of the cliff

Maybe France could go into Lybia? The whole place is a mess, since rabble almost never stands a chance against an organized force. We will see what difference air support means. Odd mix, though. Organized but de-motivated ground troops vs motivated rabble with support “angels” (unpredictable and uncontrollable yet overwhelming air power). This could make a fun religious narrative…

I think civilization spends more time than anyone knows on the edge of one cliff or another. But it will be hard for the dollar to collapse since there is no other reserve currency. On the other hand, PIMCO (the big huge bond fund) is selling its dollars, since it doesn’t see anyone else buying dollars. Certainly the Japanese are out of that game for a while, and the main buyers of QEII have been, well, the US. So really we are the only ones buying our debt, which means yes, prices should fall/rates should go up, and this could happen fast.

On the other hand, Europe hasn’t sorted out its problems by a long shot. The best they did was kick it down the road, but we are now very close to (if not at) the point to which the can was kicked last time. The only reason this isn’t major headlines is that it feels like old news and the media is bored with it. We had some excitement in Asia and the Middle East, which allowed concerns here to be brushed under the media rug. Technical analysis (which is usually advanced bunk) suggests that 1.40-1.45 is a historical resistance level for EUR/USD, so the dollar should strengthen vs the EUR from here. I’m not basing the conclusion on the technicals, rather on the fact that both regions have screwed up finances and one has to give. I think it will be the Euro. The US can at least pretend to put together a coherent policy, and since about 1865 or so no-one else takes the thought of a state leaving the Union as a serious possibility (not that any of them could afford to at the moment, given their budget messes).

Yes, money is a commodity, so the funds could flow into something else (cough *gold* cough) but what are you going to do with the gold? It is no longer a currency, despite recent law proposals in Utah. So central banks and the really big players are a bit limited. The rest looks like a big bubble. Gold is also not limited in supply, and we are pulling record amounts out of the earth. Maybe I could write a book “Peak Gold” about the decline of this precious resource? Which is actually worth, well, umm, well, it is shiny, and girls like it, so it makes you look sexy, so it is probably pretty valuable. I wonder if tulips do the same thing? I read someplace that girls like flowers…

Which reminds me of something I read once explaining how tulip mania really wasn’t that irrational. They had so much money floating around and really nowhere else to put it. Tulips sounds better than Florida real estate. One tulip bulb for a house, yes, but a nice high end (not top end, just high end) mercedes will set you back the price of 3 condos in North Port, and has a similar rate of depreciation…

We are seeing this really weird kind of inflation right now. Weird in that inflation IS actually very low (yes, I believe this). It is only prices which are going up! 


Posted on April 18, 2011, in Uncategorized and tagged . Bookmark the permalink. Leave a comment.

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