What 1 Trillion dollars looks like.

[PerryHall]

Fantastic visualization!

 

A trillion dollars? No thanks. Someone would kill me for it. Probably my wife.

 

A billion dollars? Still gonna have to pass. My kids would never learn the satisfaction that comes with a job well done.

 

A million in hundreds in an old gym bag? OK, I think I could handle that...::

 

Think of the fun you could have if you carried that gym bag to a major coin show.

[SWNGC]

Automation is a REAL game changer that makes the traditional ideology and associated conclusions derived from historical data OBSOLETE... consumption/production figures are not what they once were, as we no longer require anywhere near the number of workers that were once required to produce massive amounts of goods. (This is a big, big factor contributing to the current job market/unemployment issues) Accordingly, you have seen a massive shift of employment from manufacturing/production capacities, to service sectors, education, innovation, marketing, and tech to support the automation. This is true on every level of production, mining, farming, manufacturing, logistics, etc... and these modern facilities often operate at points far below "capacity", seeking to instead optimize roi at particular price points and tapering off production levels as diminishing returns enter the game... As a result, the only real "job" many people have is to consume, and as long as the dollar is readily available and we maintain moderate inflation, the system remains in a "stable" control range. Money must keep moving... In conducting currency valuation, it is important to remember that value and power are both derived from the underlying attibutes of the controlling/owning/issueing entity. From a very basic, but highly applicable perspective, these desirable attributes are security, food, health, shelter, autonomy and the opportunity... Countries that possess/offer these or means to reliably ensure the abundance of these WILL also posess the currencies of highest real "value", as long as proper constraints are held in place and policies/dissemination of media/pr/news is strategically utilized to maximize both perceived value and system stability on a domestic and global scale.....

 

result -> US $ is one hell of a home for your hard earned cash and will continue to be for as long of a window as we currently have data...

[awb]

My uncle got me into coin collecting when I was a kid. He's also a half-crazy conspiracy theory type.

 

So which came first? Was he a coin collector that became a conspiracy theorist, or did his love of conspiracy somehow lead him to coins?

[World Colonial]

In my opinion, there is a difference between the "megapolitical", geopolitical and economic considerations you cover and the financial and speculative ones I am directing my comments toward.

 

I do not deny that the United States will maintain its superpower status for the near future and even after that, a leading status as an economic and military power. Or at least it will do so unless it is not subject to dissolution which is a definite possiblity in the future and probably in my lifetime. I see this as a risk for many nation states; not just the United States, and the weaker the financial underpinnings are and the longer they last, the more likely seperatist movements are to suceed.

 

But this is less directly related to what will happen to the future foreign exchange value of the USD or even its domestic purchasing power which is what my comments are addressing. (The considerations that you write about only apply over very long periods of time.) Most Americans have never been outside the United States (reportedly, only about 20% or so even have a passport) and have no interest in ever sending their money offshore or leaving the country, either temporarily or permanently.

 

I'm not limiting myself in that manner. If it ever becomes in my best interests to do so (either), I'm doing one or both. (I consider myself an extra-nationalist as opposed to a nationalist or internationalist.) So yes, I do care about how much my USD wealth can buy outside of the United States.

 

The long term trend of the USD against what I consider to be the most stable currencies has and I believe will continue to be lower. This is only a handful of them but the trends in most of the others to me are irrelevant because I have no intent of owning them (except maybe as a temporary speculation) and this is true regardless of whether I live outside the United States and if so, where I live. One of the places I could see myself ending up at is in Bolivia. But I have no more intent of converting all of my money to Bolivianos than I do of joining a monestary.

 

In the deflationary environment that I expect, the USD should rally and probably strongly against all or most all other currencies. The reason for this is that there is more USD debt and it is more broadly held than any other currency. Recently, it did so except versus the Japanese Yen because the deflationary forces have been stronger in that country and financial system.

 

But after this trend has run its course, I do expect the bear market in the USD exchange rate to resume and it could be even worse. From 2000 to 2008, the USD was so pathetically weak due to the relentless credit inflation that it lost value against almost every single currency, even versus the Boliviano. Measured by the USD Index, it lost 40% falling from 120 to just over 70. Anyone who does not consider that risk to their finances is doing so at their own risk and in my opinion, is basically throwing their hard earned money away.

 

Moreover, not only is there no guarantee that the US financial system will remain a capital friendly home, but there is an excellent likelihood that it will become decidedly less or only selectively so. No crisis occurs in a vaccum and another of my future expectations also includes foreign exchange controls, capital controls or both. In Britain, I understand that these were selectively applied between 1945 and 1979 (to domestic investors) even as domestic price inflation devastated the purchasing power of the British Pound and reduced the relative standard of living of the typical British resident. My financial plan considers these aspects and so should everyone else's.

[SWNGC]

Only Half-Crazed, I thought we would have earned way more than that by now...

 

Collecting is a compulsive behavior, and in the case of coins, is often focused on extreme perfection (mint state+++). Those who focus on such perfection, are highly inclined to additionally seek (and retain/hoard) high levels of detail in association with understanding and identifying cause/effect, etc in other aspects of their lives/environments... Massive amounts of such information require "theory"/explanation to connect the various components/data/observations within a logically based "whole" (or we go mad)... Hence the "conspiracy" theory is born...

 

So to answer your question, BOTH...

 

The really crazy ones even have a logically sound "conspiracy" theory to explain conspiracy theory... Now back to the bunker to blog on the NRA site...

[DC Dawg]

It reminds me of the MegaPenny Project.

 

Scott

[SWNGC]

Senor World Colonial,

 

You are VERY correct in distingushing the difference between the macro perspective from which I have spoken and the micro/speculative (extremely accurately described) perspective from which your contributions have been based.

 

I'll side with the notion that there is an extreme chance that we will see significant change in our/US society within the next say 50 years, as it relates to the power of the people (It sounds noble, but all men/women are not created equal) this holds true for all frogs, dogs, and pollywogs too... but I do not believe you will see a dissolution of the US... In an equal voting society, Democracy as a system begins to break down when the "have nots" exceed the "have's", outvote the have's, and subsequently elect to destroy/"improperly disseminate, or equally distribute if you will" the assets/money/reserves etc of the "people" to the "people". Sound familiar - want gov't health care... Ever ride amtrak, hah, social security, medicare, fannie, freddie, list goes on and on... REALITY is that the "few" who represent the top say 1% do so for a reason and spread the money, change the game, do as you wish, they will adapt to retain that position, while others talk about what could have been...

 

From your perspective, there will always be fluctuations and trends that will create discrepancies/opportunities for speculation within any system with imperfect information, unpredictability, or differences of opinion. However, opportunity/the potential for profit, does not exist in any system where these elements are not present, as a "real" price can be derived and is not subject to unpredictable change. As a logical follow to that, it is only speculation to those who DO NOT know these factors in advance, which is what differentiates between those who invest and those who gamble. Investors seek to identify/understand/and manage all possible risks in an environment where there exists a significant premium for doing so, often as a result of either non-existant management (gamblers), improperly managed/improper analysis of data/techniques employed, or just having the wrong information to start with. Remember, it is to the benefit of those who control or may impact such a system to inject volatility into it at key points to optimize their own returns, so expect it, watch their moves, and ride their coat tails if possible. There is no larger such entity than the US gov't... Play the game, but with your eyes open...MANAGED RISK = ADVANTAGE!!! Be the HOUSE!

 

Beyond the speculation aspect that you've brought up, and in line with my assertions above, the strength of the dollar will be, within very tight constraints, very near the point (not the publicly declared point) that the US gov't has identified as it's goal. Identify what is good for the US gov't as a whole and you will have your answer (remember fluctuations are required to inject volitility/unpredictability and prevent gaming of the system by other large players (we don't count here)...). Hint-the past/trends/technical analysis oijiu boards and voodoo do no good here other than to establish a base from where we could go and get a guage of current market/psychlogical momentum - past market analysis is a diversion designed to keep the intelligent "often those who will first choose to analyze data" occupied...

 

There are no guarantees, and expect the gov't to use unexpected moves to achieve their objectives with volatility, but identify what risks are fluff and can be managed and make your "speculation" more like an investment.

 

More specific to your posting, think of this... You can leverage 500 fold on most forex trading platforms, so no need to move all of your money if you KNOW where a market is going, as there are tremendous amounts of money to be made with a very little defined risk wager... With that said, these are some of the most profitable brokerage businesses out there... Why you may ask, BUST OUT... Their model exploits the fact that you will be unable to repeatedly win and will eventually bust out due to small fluctuations being magnified beyond your buy-in due to the leveraging... A big casino for all to play... Remember that if the "decisions" of large masses of people serves to work against an entity like the US gov't, it will move to slaughter them at first opportunity. From their perspective, removing wealth from the disloyal wherever possible is a long term means of managing RISK! Extreme food for thought.

 

Regardless of approach or point of view, DEFINE YOUR MAX-RISK on all investments ALWAYS. HEDGE risk where economically appropriate(i.e. improper/expensive pricing/premium is in play) and WIN! Additionally align with the real agenda of the biggest player you are comfortable with, and win bigger on the crumbs...

 

 

 

 

[World Colonial]

A well articulated (if somewhat confusing to me) post but there are some points where i think we have a difference of opinion.

 

There is no difference between financial speculation and "investment" except the time period for which the trade remains open. All such transactions are speculation because the purpose of it is to generate a profit based upon the change in price over time. Describing financial trading as "invesment" is simply a RATIONALIZATION which is what most people did with instruments such as stocks to justify paying the absolutely absurd prices they paid before and are still paying now.

 

Additionally, I do not agree that the US government or any government can control the value of their currency any more than they can control interest rates. Any price control (which is what this would be) would simply mean that supply would disappear and create a shortage. This is true in this area just as it is in the example you gave with "free" healthcare which in other countries has led to rationing.

 

There are instances where governments can TEMPORARILY distort pricing but as long as a freely tradeable auciton market exists, they cannot do so indefinitely. (This is exactly what happened with gold prices prior to the 1970's.)

 

For example, both China and Japan would seem to be able to control the value of their currencies because of their stupendous FX reserves. China has done so by fixing the exchange rate to the USD and as long as it remains fixed and they run these large surpluses, they PROBABLY can do so. Japan has failed to do so DESPITE their surpluses and reserves.

 

In the case of the United States, I might be underestimating the power of the US to maintain the currency value but if so, I believe this is only if this is viewed in isolation.

 

There are actions the US government can take to maintain the USD reserve status and relative value. I expect it to take some of them which is why I expect deflation in the next phase of the economic depression contrary to the opinion of (apparently) 90% to 99% of the people on this board and probably an equivalent proportion elsewhere. (The other reason I expect it is because a lopsided majority is invariably wrong. The resolution to the mania proves that AGAIN even though it took much longer than I expected.)

 

However, I consider this only true when viewed in isolation because the only way that this can happen is if other outcomes which are "suboptimal" occur with it.

 

For example, deflation is (in my opinion) better for both the US government and the economy in general but it will still be a disaster for millions in the form of crashing asset markets (stocks, real estate and yes, even coins) and widespread economic hardship.

 

Its just that the powerfull interests that you allude to have LESS to lose from deflation than runaway or even high inflation which is one of the reasons I consider it more likely right now.

 

But the other reason is because of psychology. I expect the next phase of deflation to occur REGARDLESS of what the government does or does not do. First, its a complete myth that the government can direct outcomes to where they always want them to or even generally. That appears to be true most of the time but the impotence of the Federal Reserve in this crisis shows that ultimately, even they are bystanders.

 

Second, the country has mortgaged much of its future by living way beyond its means. And because foreigners own so many USD claims, they may act contrary to "our" interests despite the US government's power of coersion. For the most part, the interests of most other coersive states (think almost all of them) are similar to "ours", but not always or in every respect. Where possible, we know there will be backroom "deal making" to paper over differences but ultimately, its every nation, entity and person for itself. And because of that, I expect the value of the USD to fall, possibly against a substantial number of currencies, after this temporary rally is over.

[SWNGC]

Because investment involves risk, it, of course, falls under the definition of and is a form of speculation in almost every case. The primary objective of the most successful investors is to manage the identified/perceived risks associated with every "investment", with the objective of structuring their moves such that the actual impact that may result from the actualization of these events results in an offsetting quantifyable action that serves to LIMIT down side exposure with the ideal scenario resulting in a max gain/max pain quantified win/loss that may occur and a set time frame for entry/exit within which the system must remain stable. Simplified examples of this may be found in popular option trading strategies such as an iron butterfly/iron condor/straddle/strangle etc. Sometimes opportunity exists in not even knowing which direction a particular interest will move, but simply knowing that it WILL move or WILL NOT move. These premises are extremely important in some forms of arbitrage pricing.

 

As to the ability to control systems, in the strictest sense of the definition, it approaches impossible to 100% control any complex system over a long period of time. This is not, however, unachievable within either very short periods of time, i.e. times determined to be critical to success within certain financial/political agendas or within less stringent constraints/tolerances. Accordingly, almost everything can be "controlled"/influenced if properly excited. The same approaches applied to the simpleist systems, can be applied in the case of large monetary/political/geopolitical systems. In a simplistic form, this process involves identifying the subprocesses of the system (modeling/adaptive modeling), the constraints within which each "part" may operate, the motivators that may be introduced to achieve a desired response, and the timing involved, including potential for over/undershoot, and the risks of each to overall system stability. ALL Gov't moves to change rules, create new programs, disseminate news, revise news, etc are ALL means of manipulating (controlling if you will) these complex systems. These are the outside/unnatural stimuli that serve to "guide" the system and constrain it to the desired path...

 

In the case of China, we've already discussed the ongoing shift of power, as we have effectively moved to transition their biggest strengths to bigger weaknesses, expect this to continue until they come around to the desires of the other major nations of the world... Everyone makes a huge deal of China's holding of US debt. This figure was $801B as of mid year, which is only about 2/3rds of what we've spent on mortgage reform programs... They need this $ to "believe" that they have a way to influence our actions and we'll continue to let them think that as long as they remain our chumps. In real terms, that's $250 for every person in china, a sum we can recover near overnight by upwardly manipulating the global grain/food/oil/commodity prices for essential goods...

 

KEY-Mortgages/debt are great, but they are fabricated instruments, wipe it all away (i.e. default on world debt), and you'll find that the real physical assets/infrastructure that the money was used to create remain, are viable, and will continue to serve the purpose for which they were constructed. i.e. others gave us their money to make ourselves better at the expense of not improving their own position and in the "hope" of receiving "more" at a later time... Ponzi, hell yes, ALL systems (real estate, stocks, bonds, options, futures, commodities, currencies) that provide current valuation for an entire market based on the recent sales prices of only a miniscule portion of such a portfolio is... Treat it as such and actively manage risk!

 

Your actions obviously have intelligently construed underlying motivating factors, which is waaayy better than 99% of those who "invest", and is admirable. Regardless of direction, remember that BIG moves in currencies are generally highly undesirable, as they inject a higher probability of particular systems reaching points of instability. We do not want our currency to fail, nor do we wish to crush most other currencies, as the actions of these people have been aligned to benefit our society. However, it does appear to be our objective to ensure that the world slowly "chooses" to migrate even further towards the dollar as an international/world trade medium... Dollars will be "cheap" and dollars will be "expensive" in the coming days/months/years/decades/centuries, etc those who recognize and capitalize on these occurances/inflection points, will have more dollars to call their own at the end of the day...

 

Fighting an expanding/inflationary US monetary policy in the current environment is a difficult stance from a macro position... (we will only deflate our currency when we are the holders of an excess of our money (i.e. lower world debt position) - When we OWE money to the world, our objective will always be delay payment and/or if required to pay it back with diluted/inflated future dollars... (Something we will never put so blatantly in print) Good luck and best wishes to you sir!