[FoRK] August 2007 Update of The Second Great Depression

Adam L Beberg <beberg at mithral.com> on Wed Aug 1 17:21:34 PDT 2007

Kevin Elliott wrote on 8/1/2007 3:37 PM:
> The problem is that it's much closer to 80%.  And that 80% was deposited 
> BACK into the bank.  And recycled.  Very, VERY quickly nobody has any 
> "real" money.
> Read here: 
> <http://en.wikipedia.org/wiki/Fractional-reserve_banking#Financial_ratios>
> Much to my shock, Canada has a apparently gone all the way: the bank is 
> allowed to loan out 100% of it's deposits.

That page is a really good. That's how it works for banks. Hedge funds 
are not banks. They have little if any rules at all and tons of secrecy. 
Leverage ratios of 100x are common, even conservatives for a fund.

For example you can right now open a currency trading account and get 
100x margin i.e. the broker will loan you $99 for every $1, and that 
dollar could be a loan from a bank, and you're just Joe Public. Just 
imagine what professionals can think up.

In Jan 2007 total world assets were only ~140T. Almost all money is just 
bits, that's why it's called a Fiat currency, and those ALWAYS fail.


As for housing, a house is worth [100 x monthly rent], it's one of those 
magic numbers that is always restored to normal no matter how long 
people are in denial. Rents are high in areas people want to live, and 
so are the house prices, both are low in places people don't want to 
live, but the 100x ratio may as well be a fundamental law of the universe.

Have a look at the Price/Rent column:

This means that the avg house in San Jose, CA _is_ worth 1/4 what it is 
now, or inflation can fix the rent, either way we're FoRKed.

Want a real brain-FoRK? Imagine for a second what we all know will 
happens happens, Americans desperately need jobs so they kicked the 3M+ 
illegals out of California by actually enforcing the law ... and all 
those houses open up for rent. Now no immigration policy makes sense now 
doesn't it, and you thought it was racism. We're in for some fun times 
;) Bet accordingly, with ... derivatives! Muhahahahhahahahahahaha.

OK, now back to puppies and jellybeans, mmmm.

Adam L. Beberg

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