Wednesday, April 22, 2009

Best of the Web

Between a long day at work and having to run out and do errands before the vacation week, I am out of time for a well reasoned post this evening. I cam across several truly outstanding articles today that I thought I would pass along if you are so inclined.

Housing Related Articles
What you have to understand about every government action since last summer is that they are operating under this assumption:

Home prices, and thus every instrument tied to them, are depressed only temporarily. If "liquidity" can be supplied in enough size and over a long enough period those prices and instruments will recapture their full value and there will be no crisis.

That's it and that's all. Now of course this assumption is wrong, but what can you do?

If anyone in the government had a spare 20 minutes, I would ask them to take a history lesson with Doctor Housing Bubble who captures in a recent post just how riddled with fraud and pure insanity some housing markets became.
History lesson here.
I would also add my own history lesson. After the 1989 real estate bust, it took about a DECADE for the home prices in my city to recover their dollar value. Adjusted for inflation, it took well over 14 years. Think about that and then think about how long the "liquidity" may have to flow.

If you are still not convinced, one of my favorite writers on all things political, financial, and life in general is Charles Hugh Smith. Mr. Smith explains in easy terms so even the Treasury could understand why housing is simply not coming back any time soon.
Full explanation here.

Spend a Day with the Automatic Earth
I have to say that the site The Automatic Earth is my favorite read for the day. The intros by writer Ilargi are often the most well thought out works of writing I have ever seen, until the next one comes out! The collected news stories are often the most pertinent anywhere.

The Automatic Earth has recently gone to two a day posts and I could not be more appreciative. Spend this day looking over the posts and see if you agree with me.
This morning's missive.
This evening's take.

Gold Related Item
Minyanville's Kevin Depew's daily piece "Five Things to Know" is always a great read. Kevin was even so kind as to include some content I had found a while back.

In today's post Kevin goes after the metal gold in the number 5 item with the same old complaint that it is useless unless the world ends, and then it is not as good as a gun (or other various items).

His summation line is thus:
Just about every scenario I can think of where gold is useful -- for purposes other than admiring it -- also requires a life raft. Just about every scenario I can think of where gold has great worth means that anything else I own has little, if any, value - but hey, at least I have a pillowcase full of gold.

I understand this line of thought. As good Americans, most of us scoff at gold. After it was all taken from the public in any real tangible sense in 1933, most never thought about it. After Nixon junked the gold standard, Americans fell in love with paper money as their purchasing power was destroyed. We were indoctrinated that "stuff" and paper money was "real value" and that gold was a shiny metal good for rings and printer cable connectors.

Now you may ask yourself who would want you to believe those things.

Mr. Depew is right; in a real life "end of the world' situation I would rather have an army of 3000 armed men, well supplied, in a great defensible location with clean water etc..(you get the idea) than all the gold in Fort Knox. Gold would indeed be "useless", until some order was restored that is.

There are many levels of "end of the world" events however. The complete collapse of the US is not necessary for gold to have real value. I do not have the time to go over all the very real scenarios where life would not change to an obscene degree where having gold would be very lucrative.

Either you "get" gold or you don't. The best example I have ever seen (I cannot find where I read it, so no reference) is this:
In 1900 an ounce of gold bought you a very nice suit. In 2009 an ounce of gold buys you a VERY nice suit. The $20 dollars in 1900 for the suit cannot even buy 4 value meals at McDonald's in 2009. Still think gold is stupid and worthless?
Reread that last example as many times as needed for the truth of it to sink in.

Have a good night.


Ilargi said...

Thanks for the compliments and kind words, much appreciated. One little thing: I publish around 1pm and again around 7pm, so what you call morning is in fact from the night before, and what you cal evening is the early post.


watchtower said...

I'm holding PM's because the United States of America has went from being the largest creditor nation in the world to the largest debtor nation in the world and seemingly no intention to ever correct the situation.

Will it turn out that this move will help my family in the future?
I kind of doubt it but I wanted to place a bet before the dice are thrown just in case.

Ilargi said...

Oh, and I forgot: the Gold for a Suit tale goes back all the way to Roman times, when an ounce of gold bought a good quality toga.

getyourselfconnected said...

Wow! Thanks for stopping by Ilargi, you are one of my favorite authors! I am very excited you left a comment.
Before rampant inflation brought upon by Emperor Bennius Bernakius Nero, a great Toga went for about 5 denarius, but then jumped up to an entire aqueduct for even a poor quality garment. Soem things never change! Stop by again.