Saturday, January 19, 2008

How Long Can This Last? The Burst Of Our Bubble

Last fall I read the book "And the Money Kept Rolling in (And Out): Wall Street, the Imf, And the Bankrupting of Argentina" by Paul Blustein and was left somewhat shaken, recognizing the similarities between the economic collapse of Argentina that culminated in 2001 and what is going on in our country right now. i.e. the real estate bubble. The parallels are frightening. Fortunately, as Paul Krugman points out in his op-ed piece in the New York Times, "Don't Cry For Me, America," our debt is in U.S. dollars whereas Argentina was caught in a far worse trap: The value of their Peso was dropping like a lead weight, but their obligations were in U.S. dollars. A much bigger nightmare than ours. (We hope.)

The real concern (the frightening parallel) is that the global economic forces at work are not understood by anyone and they are regulated by nobody on a global scale. This was painfully evident in Paul Blustein's book, in which we see how baffled and impotent the IMF and leading economists were at preventing certain disaster in Argentina (and before that, in Mexico, Russia, Brazil, etc.). It's amazing that the Bush administration and Alan Greenspan did not see the real estate bubble coming and begin preparing (i.e regulating those who were running amok). Didn't we all marvel at the endless construction of condos and mini-mansions, grow nervous and in the conversations amongst ourselves, say, repeatedly, "How long can this last?"

Quote for today: "Those who cannot remember the past are condemned to repeat it." - George Santayana

Thought for today: Most of our collective retirement accounts are based on investments in the stock market. Yet the stock market is merely a version of Las Vegas where the cards are called certificates and where the shows are on Broadway. But don't think about it too much or you will get really spooked!


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