Is it incorrect to state that for the past 15 or so years the U.S. has attempted to create wealth out of thin air?

Aug 10, 2001
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In the middle to late '90's it was the internet companies, while over the past 6 or 7 years it has been mortgage-backed securities. Both attempts failed miserably. What comes next? Is the U.S. no longer capable of producing real wealth?
 

brandonbull

Diamond Member
May 3, 2005
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Isn't that the basis for a fractional currency system?

Wall St. guys have managed to get Ponzy schemes and gambling legalized. They just have to give the Fed it's vig and it's all good.
 
Nov 7, 2000
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ehhh, not sure i would word it like that but people really do tend to overlook basic economic principles when it comes to finances
ex. 'free' healthcare
 

LegendKiller

Lifer
Mar 5, 2001
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Originally posted by: brandonbull
Isn't that the basis for a fractional currency system?

Wall St. guys have managed to get Ponzy schemes and gambling legalized. They just have to give the Fed it's vig and it's all good.

Let me know where you see a ponzi scheme in the RMBS space. I'd be interested.

Bubble/Busts aren't anything new.
 

Saint Nick

Lifer
Jan 21, 2005
17,722
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I know that one guy with question marks all over his suit is rated as #99 person ruining america.
 

Savij

Diamond Member
Nov 12, 2001
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Originally posted by: Random Variable
In the middle to late '90's it was the internet companies, while over the past 6 or 7 years it has been mortgage-backed securities. But attempts failed miserably. What comes next? Is the U.S. no longer capable of producing real wealth?

The entire world has been trying to create wealth out of thin air for the history of time. The job you're working right now is your best attempt to create wealth out of thin air (with the least amount of and least annoying effort that you've come up with so far).
 
Aug 10, 2001
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Originally posted by: LegendKiller
Originally posted by: brandonbull
Isn't that the basis for a fractional currency system?

Wall St. guys have managed to get Ponzy schemes and gambling legalized. They just have to give the Fed it's vig and it's all good.

Let me know where you see a ponzi scheme in the RMBS space. I'd be interested.

Bubble/Busts aren't anything new.

We got out of one bubble/bust by producing another bubble/bust. Has that happened before?
 

LegendKiller

Lifer
Mar 5, 2001
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Originally posted by: Random Variable
Originally posted by: LegendKiller
Originally posted by: brandonbull
Isn't that the basis for a fractional currency system?

Wall St. guys have managed to get Ponzy schemes and gambling legalized. They just have to give the Fed it's vig and it's all good.

Let me know where you see a ponzi scheme in the RMBS space. I'd be interested.

Bubble/Busts aren't anything new.

We got out out of one bubble and bust by producing another bubble and bust. Has that happened before?

I wouldn't say that one absolutely caused the other. Many things had to happen, other than lowering rates, for this fiasco to be possible, many of them not even remotely related to helping us get out of the .bomb situation.

Not to mention this thing happened before, during the 80s.
 

Greenman

Lifer
Oct 15, 1999
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Originally posted by: Random Variable
In the middle to late '90's it was the internet companies, while over the past 6 or 7 years it has been mortgage-backed securities. But attempts failed miserably. What comes next? Is the U.S. no longer capable of producing real wealth?

What is real wealth? Lots of people made vast fortunes investing in company's that could never make a profit. I know people that did very well buying and selling houses that had very little "real" value. All that really matters is that someone with a little cash, or the ability to borrow it, thinks that the value of something will increase.
 

dullard

Elite Member
May 21, 2001
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To me, "real wealth" is something that is tangible. This means food you can eat, cars you can drive, computers that function. Thus, the real wealth that we create is equal to the value of raw materials we get from the Earth plus the value of the labor put into the goods (but only to the extent that the labor makes the goods better).

Unfortunately, people have long tried to make their pocketbooks worth more without resorting to those two inputs. They want something that goes up in value without actually requiring new raw materials or new labor. They want something to be worth more just because. This type of "free wealth" idea usually leads to bubbles.

Suppose you have a pile of worthless crap and the rest of the world has a pile of useful stuff. If you can convince someone to buy your worthless crap, it is still worthless crap. But you suddenly have something of value (their money or whatever was used for barter). In the end, the world's REAL wealth is the same after this transaction: there is still the same amount of worthless crap and the same amount of useful stuff. But, here is the catch, there is an APPARENT new value created in anyone who has that worthless crap. It appears like the world is wealthier. You personally gained, and the person you sold the worthless crap THINKS he gained. As long as he can fool a 3rd party into buying it, he did gain. Yet now two people gained, a 3rd thinks he did, and yet there was no real gain in the world. The pyramid scheme continues and eventually it comes crashing down when it is finally realized that it was, all along, worthless crap. The apparent wealth vanishes. But the real wealth never changed.

It happened to tulips in the 1600s. (First recorded bubble).
It happened to railroads in the mid 1800s.
It happened to land all around the world at various times.
It happened to internet stocks.
It happened to housing.

It'll keep on happening. Thats the American way. Note: most of these examples weren't entirely worthless crap. They had real value. But the pyramid scheme was in making the apparent value far greater than their true value.
 

StageLeft

No Lifer
Sep 29, 2000
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In a way but another is simply wealth is being borrowed from the future's productivity. Excessively so, I think.
 

Train

Lifer
Jun 22, 2000
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www.bing.com
partly due to the rise of "creative accounting"

some big time accountants are turning into the Johnny Cochran's of thier field, weilding the ability to "legaly" make any target outcome a reality.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
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Originally posted by: Train
partly due to the rise of "creative accounting"

some big time accountants are turning into the Johnny Cochran's of thier field, weilding the ability to "legaly" make any target outcome a reality.

Creative accounting has been around since the beginning of time.