I mean... I don't know. GoTo? Is that even a thing anymore? It feels like we’re just circling the drain with these discussions lately. Maybe I’m just being cynical, but I guess everything feels a bit aimless. I don't know. Just my two cents, I suppose. kaže:
That was a fantastic read!
You think so? Honestly, the whole thing is just a mess of arguments that don't hold any water. First off, the guy isn't even the actual author of this piece. It’s just like all those other posts spamming this forum—nothing more than some pseudo-analytical, wishful-thinking essay written by one of those Italian crypto-communists. He used to at least put their names at the bottom of the posts, but I guess he finally realized just how much "weight" those authors actually carry around here.
First off, this whole idea that we’re staring down a collapse even worse than 1929 is just... I don't know, it's ridiculous. It really is. There are so many reasons why that argument doesn't hold water. For one thing, despite all the endless doom-and-gloom talk about asset inflation caused by easy credit, equity prices today aren't even remotely near where they were back in '29. I mean, look at the numbers. The P/E ratio for the S&P 500 companies—the ones that actually represent the backbone of American industry—is sitting somewhere around 17. Back in 1929? It was hitting nearly 100. By that logic, markets like China's or maybe some emerging market over in Southeast Asia are in way more danger of a total meltdown than the US market is. Maybe the only real red flag is the derivatives market. But then again, you have to consider who is actually trading those derivatives. It's mostly institutional players handling high-net-worth assets. So, I guess if that specific market does go south, it probably wouldn't even touch the average person or significantly impact the broader stock market. At least, that's my take on it.
Look, besides the fact that the stock markets are in a much healthier state now, central banks are just... they're way more seasoned and sophisticated than they were back in 1929. I mean, let's be real—the Federal Reserve has been around for nearly a century at this point, whereas back in '29, it was this relatively green, unproven institution that only got kicked into existence to deal with the fallout from the Panic of 1907. It’s a completely different beast. And here’s the thing—it feels kind of paradoxical, doesn't it? This author keeps insisting that our main problem today is that we aren't on the gold standard anymore. But if you actually look at the history, the absolute worst crisis we ever faced in 1929—not to mention those smaller tremors like the 1907 panic or the issues in 1922—those all happened while the gold standard was still very much the rule of the land. So, calling the lack of gold a modern problem isn't really a paradox; I guess it just shows the author hasn't quite done their homework on the actual mechanics of it all.
Look, I guess there’s a fundamental difference between what we saw back in 1929 and how things work today. We actually have the IMF now. Their whole job description is basically stepping in to maintain liquidity when everything starts hitting the fan during a financial crisis—trying to contain the damage before it spreads everywhere, much like they did during the Asian crisis or that Russian default. Now, don't get me wrong, people absolutely tear into the IMF for their obsession with fiscal discipline. It’s a valid criticism, I suppose. But, if you look at the facts, they do provide those initial capital injections during a crisis. That gives governments just enough breathing room to consolidate their positions... and maybe, just maybe, find a way to pivot away from the IMF's strict recommendations down the road. Or perhaps not. It's complicated.
I guess... if you look at how everything is wired together in today's economy—all those mechanisms and messy situations we’re stuck with—it’s almost strange. You have these massive collapses like Long-Term Capital Management, the whole dot-com bubble bursting, the Asian financial crisis, or scandals like Enron, WorldCom, and Tyco... and yet, they didn't just trigger one giant, unstoppable global meltdown. They stayed somewhat contained. Maybe it's because of the way things are structured now, I don't know. But honestly? I think the real headache on the medium-term horizon isn't some sudden systemic collapse. It's inflation. For the last two decades, globalization basically kept a lid on it, but that's changing. That might be the actual problem we need to worry about.
The idea that there’s just one single currency ruling the world today is, frankly, nothing short of utter nonsense. I mean, honestly. People act like the dollar is this untouchable monolith, but if you actually look at the data, trade denominated in dollars and foreign exchange reserves held in USD are both in a steady, constant decline. It's happening right under our noses. Back in the day—we're talking four decades ago—about 80% of all foreign exchange reserves were held in dollars. Today? We’re looking at just under 60%. It’s a downward slide. And really, it makes sense, doesn't it? As the American economy's slice of the global pie continues to shrink, it follows that both international trade and those massive dollar reserves would shrink right along with it. It's basic math, I guess. We've seen this play out before. This is the exact same trajectory followed by the Spanish real, the Dutch guilder, and the British pound. They took turns holding the crown, and eventually, the dollar stepped up to take its turn. But now, because of how hyper-globalized everything has become, there isn't a single clear successor waiting in the wings. Instead, the dollar will most likely be replaced by a basket of different currencies—which, if you think about it, is just a reflection of a much more multipolar economic world. Now, people always ask: will the dollar collapse, or worse, will the US fall apart during this transition? I don't think so. You only have to look at history. Look at Spain, the Netherlands, or the UK. They all went through this exact process of stepping down from the economic throne. And did they collapse? Of course not. They are still incredibly wealthy, prosperous nations. They lost their dominance, sure, but they didn't disappear. I suppose we're just witnessing the next chapter of that same old story.
Regarding the dollar exchange rate... honestly, these doomsday theorists—especially economic illiterates like the original poster here—should probably just stick to referencing historical rates and the cycles the dollar has already navigated. Right now, the dollar is sitting against the Euro roughly where it was back in '93 or '94, and back then, G7 intervention saved it from sliding any further. Then, a few years ago, when the dollar hit that 0.8 ratio against the Euro, the G7 stepped in again to save the Euro from crashing. The point is, exchange rate imbalances don't benefit anyone. Specifically, a weak dollar doesn't suit the US, which is the largest trading partner for the Eurozone. A weaker dollar means less purchasing power for Americans, which leads to lower demand for exports like BMWs and other goods, which automatically translates to a weaker economy for the Eurozone and its massive exporters, like Germany. For those reasons, I guess it’s just foolish to celebrate a potential dollar collapse because it simply isn't going to happen. Political pressure is already mounting within Europe—you see leaders like Sarkozy and German exporters whining about monetary policy—which will likely lead to, if not unilateral action by the ECB, then at least a consensus among the big players.
I believe in this enough that I reinvest my excess Euro income into US assets. Currently, they look like good value thanks to the weak dollar, especially equities in major American banks, which seem undervalued compared to historical norms. I’d actually love to see how much the author of this article has personally put on the line regarding these doomsday predictions. If they truly believe in a total collapse of the dollar and the American economy, then fine, they should go to
www.forex.com or something similar and open an account with 1:100 leverage. That way, with just $1,000, they could control $100,000, meaning with a $10k balance, they could short $1m against the Euro and wait for the rate to hit 1:2 to pocket maybe $50k in profit, or whatever. Or they could just short stocks in American companies, specifically the big banks. There's no harm in it; if the crash happens, they can profit big time. It's time to put your money where your mouth is. 🙂
To circle back to the author's thesis that the US uses IFRS to promote some kind of accounting obfuscation... I think the author might have overlooked the Sarbanes-Oxley Act, which was the American regulatory response to the accounting scandals involving Enron and WorldCom. Sarbanes-Oxley actually defines requirements for more detailed and transparent financial reporting. It’s the exact opposite of what was claimed in the opening post. The author's categorization of the American—well, really the Anglo-Saxon—system as one that "increases the fog of accounting and the relativity of such representations to shareholders" seems to stem from a misunderstanding of the cultural differences between the Anglo-Saxon and Continental accounting models. The Continental model is much more prescriptive and legally detailed, whereas the Anglo-Saxon model relies on professional self-regulation through standards. Neither system is inherently more or less prone to fraud; after all, Europe has had its own share of accounting scandals. Even the author's mentioned Italy had its own version of Enron—the Parmalat scandal—which was comparable in magnitude and financial damage. Besides, IFRS aren't American standards, nor were they created under US dominance. The founding countries include places like Germany, France, and Japan, and convergence with US GAAP principles is only a relatively recent development.