I was watching a special on WW1last night and it kind of triggered me to think about this whole financial mess were in...I am not an economist but I have definitely been paying attention. What caught my eye specifically in the special about WW1was the type of economy Germany had after the first war when they were forced to pay6 back reparations to the Allied powers for the cost of the war. Well the result was Germany did not have the funds so in order to comply they just printed money for the reparations and handed it over the the Allied powers...While the result was catastrophic the economy tanked and the famous pictures we all saw after the Soviet Union was dismantled were actually preceded by the German ones although no one was paying much attention because WW2 was right around the corner. The picture I speak of in both cases is the one where citizens have to cart a whole wheel barrel of cash just to buy a loaf of bread. You may ask by now what is my point? The point is that all this bailout money were are injecting into the economy has no backing just like Germanies' currency after WW1...So will our fate be the same, will the dollar plummet and loss value? I hope not but given what is going on in Washington how can it not... The deflation and liquidity crisis is mostly looked at as a bad problem. But a simple illistration points out that if you can survive the crisis your money will be worth more. For a simplified example consider this; the US economy runs on $10 of cash, the crisis hits and now we only have 5$ in the system. The people with the remaining 5$ of money now will have less but it will be worth more. $5 of cash in the system is gone so the remaining is still servicing the same people but with only less cash thus making the remaining $5 in the long and short worth more. Less money in the system equals more value for the money still in the system. So after all the deflation and liquidity issues the money you can hang on to will ultimately be worth more...
It may not be scientific but it seemed to make sense to me...
As usual I welcome all comments and criticism...
This has been a deep thought by:
Mack Handy
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