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Sat

19

Jun

2010

Too Many Disturbances in the Force
Saturday, 19 June 2010 16:07
by Stephen P. Pizzo

A couple of years ago I was chatting with a couple of Realtor acquaintances. I understand the real estate sales business well, having been a real estate broker myself back in the late 1970s. Realtor are natural-born optimists. They can find  silver linings in even the darkest economic clouds. When prices soar they warn would be buyers not to “miss the boat.” When prices plunge they warn would-be buyers … well, not to “miss the boat.”

So anyway, I was singing my usual fiscal Chicken Little ditties to these two real estate agents, and they were clearly not buying any of it.

“I had my best year ever, last year,” one announced while pointing out her “Top Agent of the Year” award hanging on the wall behind her. The other chimed in that "real estate does well if no matter what the stock market does because, as the saying goes, 'they're not making the stuff anymore.'”

As I said, having been there once myself, I understood where these two “what me worry?” sales people were coming from. I knew that I was not only wasting my breath.

So I just shook my head and asked them if they'd seen the old Star Wars movies, and they had. 

“Well then, I said, let me just say this. I understand that real estate has weathered a lot of economic ups and downs over the past decades. But this time is different. This time the world's economies are not going to be just struggling against one 'disturbance in the Force,' but many disturbances in the Force.. too many at once. This one is different."

And so it came to pass. Or has it? Or has it just begun?

While everyone is consumed with the media's disaster obsession dejur – the ecological holocaust in the Gulf of Mexico, or the two can't-win-can't-leave wars in the Middle East --  the world financial systems continue undergoing what can only be described as a slow-motion train wreck of breathtakingly historic proportions.

All that's left now is to wait until this massive pile up exhausts itself. Then, once the dust settles, things will get really interesting. Something similar happened in 1917 in Russia, though on a far smaller scale. This time it will be the entire developed world looking for a new, more equitable, more sustainable economic model.
 

I have no idea what form it will take. But most of us alive today will find out. My guess is it will be a blend of free and government managed and regulated market economies. There will be a lot of socialism, a smattering of communism and a Renaissance for small and owner-operated businesses. Local needs, products and growth will be more important than national or international. Public transportation will supersede private. In short, if Tea Baggers hate the current system what will replace it is gonna drive them even nuttier -- if that's possible.

But that's just a guess. Between now and then all we can do as individuals is to stay informed and remain nimble of foot.

Here's more on the same theme.

Gold’s 30% Surge Puzzles Bernanke, But Not This Guy

By William Pesek

June 14 (Bloomberg) -- Alan Greenspan had his conundrum. Now, Ben Bernanke has his enigma.

The behavior of long-term interest rates had the former Federal Reserve chairman scratching his head. It’s gold that puzzles the current Fed chief. Damned if Bernanke and his fellow central bankers can explain the surge by a metal John Maynard Keynes once dismissed as a “barbaric relic.”

“I don’t fully understand movements in the gold price,” Bernanke said on Capitol Hill last week.

That shocks gold bulls like Johann Santer, managing director at Superfund Financial in Tokyo. And it may be awful news for the global economy that some investors are surer than ever that the gold rally is just getting started.

It’s hard to decide what’s more frightening: that investors are losing confidence in paper money or that the shepherds of the world’s major currencies don’t get what’s going on. Gold’s climb of almost 30 percent in a year reflects fear, not just market concern over inflation or deflation risks. People have lost trust in the global financial system.

As Lehman Brothers Holdings Inc. was crashing in September 2008, Superfund was loading up on gold. At the time, Santer got his share of giggles and rolled eyeballs for predicting gold would rise to $1,500 an ounce over the next two or three years. With gold around $1,230 an ounce, no one’s laughing anymore.

‘Black Swans’

There are many reasons why gold is back in vogue, yet two in particular are worth considering. One is fear about “black swans,” unexpected events that have great impact. The second reflects how little gold many central banks in Asia and elsewhere hold on their balance sheets.


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