patrick.net

From

http://en.wikipedia.org/wiki/Benjamin_Bernake

"Born in Augusta, Georgia (to Philip, a pharmacist, and Edna, a schoolteacher), he graduated from a high school (with 1590 out of 1600 on his SAT) in Dillon, South Carolina in 1971?; from Harvard University (summa cum laude) in 1975; and earned his Ph.D at the Massachusetts Institute of Technology in 1979. He taught at Stanford University from 1979 until 1985, was a visiting professor at New York University and has since then been a tenured professor in the Department of Economics at Princeton University. He chaired that department from 1996 until September 2002, when he went on public service leave. He resigned his position at Princeton July 1, 2005. He has given several important lectures at the London School of Economics on monetary theory and policy and written three textbooks on macroeconomics. In 1997, Bernanke earned his FAA private helicopter license, concluding over four years of weekend flight training."

Anyways, I must be ultra dense, I didn't realize the dancing guy was supposed to be Glenn Hubbard. Duh!

SFWoman,

Let's just blame Princeton. Nobody here from Princeton, right?

When I see HeliBen I see arrogance.

I think I'd better just blame BushCo. They have a habit of ruining good economists...

There is something about MIT that makes me hesitate about sending kids back there again, academically brilliant, but the institute is too intense, competitive at all cost, not a very friendly kind of place. Two took the plunge when I was there, there might be more suicide cases that I was not aware of, but anecdotewise, MIT has a higher suicidal rate than other schools of the same calibre. I am not sure if Randy will be happy there, because most people I know are not.

My first choice was actually Caltech, but I was not accepted.

Owneroccupier,

Really? I know some people who went to MIT and they're quite laid back and well adjusted. In fact, I'll go so far as to say they're some of the most well adjusted people I know. It's a bit intense, but pretty cool if you're smart and well grounded.

The fact that Ben Bernanke actively campaigned for his job means:

1) He is not very smart, at least from the big picture perspective. If I were offered such a position, meaning I am competent enough to fill a lot of other positions of similar power and significance, I would have turned it down over a heartbeat. The informal job description of Fed Chairman at this point should be: to assume full responsibility for Greenspan's blunder.

2) He is very political, meaning he will cave in to political pressure during election years. So I do expect him to drop $$$$$$$ from the helicopter just based on his being political.

Perhaps there is a big difference between undergrad and grad programs, but the undergrads I know are not the happiest persons on earth either. It depends on whether they are doing it for themselves or for their parents, you know lots of Asian parents force their kids into engineering.

Owneroccupier,

Yes, the "biology" majors...I've heard the stories.

I guess I'm friends with people who are happy nerds who really wanted to be at MIT.

Top tier tech schools are definitely sink or swim propositions. I heard about a story about the MIT math grad student who wouldn't let her study partner see her (extremely detailed) study schedule...maybe it gets a little out of hand in grad school...

When these guys maliciously tried to keep our deposit, and I took the letters and small claims route, they pulled some intense legal thing-a-majigger to get the case moved to “big boys court”, where it was going to take 4-5 years to get hearing and I’d need a real lawyer to do the filings. They got my $.

I do not want to take people to court. Karma will get them just as quickly. Really.

Peter P,

With karma, you may have to wait several lifetimes, and payback will come in totally unrecognized forms...trust me, small claims court is much more satisfying.

With karma, you may have to wait several lifetimes, and payback will come in totally unrecognized forms…trust me, small claims court is much more satisfying.

How is that satisfying? Sometimes Karma works quickly.

He is very political, meaning he will cave in to political pressure during election years. So I do expect him to drop $$$$$$$ from the helicopter just based on his being political.

Knowing this, being a homedebtor is not that bad after all, right?

I've taken people to court because I don't want the bully to get away with my lunch money. If I let people bully me around, then I need to stand up for myself....not to teach them a lesson...to teach me a lesson. I hate court...nobody wins but the lawyers...but I just can't bring myself to reward unethical behavior.

But Bernanke won't drop money at the debtor level. The impact of inflation works differently on different classes of assets, it is not an 1:1 effect on housing.

If he were to drop $$$$ directly on the street, then our consumable price would be affected right away. Unfortunately he will be dropping $$$ at the institutional level through financial instruments, which means, most Americans with no exposure to these financial instruments won't benefit much. The only way for them to benefit in the last few years was through exposure to RE, but RE has a limit, because it must be supported by the income level, no matter how cheap money is, it has a cost. So borrowing does have a natural limit.

However, some assets may see no end to spike, especially those that has very little to do with consumption. They act as the perfect channel to "drain" the extra liquidity, precious metals being one of them. Anything else that is leaked into the consumption channel will hit a natural ceiling level constrained by people's pay.

Gold!

There will be much political will to stablize oil price. However, governments do not care about gold price any more. It can be of any price.

NOT INVESTMENT ADVICE

That is of course in theory, because in the end all the gold hoarders would like to exchange gold into something that bring them satisfaction, houses, cars, etc. Gold is just a denomination of value, I can't chew on it (or I die of poisoning), I can't sleep on it, so if it is not exchangeable into consumables in the end, it will be worthless.

Originally we hoard money, but as we lost trust in money because our earning speed cannot surpass the printing speed, we start to hoard gold. So gold is just a way of slowing down the pace of inflation in the hoarding process. Once we are done with hoarding and start spending, price will be affected. So whatever we do, hoarding commodities or gold or oil, is just a way of deferring the price hikes into the future. Money printing will come back to bite our ass no matter what.

That is of course in theory, because in the end all the gold hoarders would like to exchange gold into something that bring them satisfaction, houses, cars, etc. Gold is just a denomination of value, I can’t chew on it (or I die of poisoning), I can’t sleep on it, so if it is not exchangeable into consumables in the end, it will be worthless.

Gold has no intrinsic value. But people are irrational. And they see value in gold.

Money printing will come back to bite our ass no matter what.

Then we should borrow as much as we can. The question is: what to buy with the debt.

NOT FINANCIAL ADVICE

Unfortunately, people who are financially smarter than me have already discovered what inflation is in store for us. Gold is already at a 25 year high. Am I not a bit too late to the party ?

I read a news last week, where some commodity Guru was saying there is no bubble in Gold. The contrarian indicator should in such situation mean, very little upside left. I think Gold will move up, but from this point onwards, the gains may not keep up with inflation.

Psychologically, gold has a huge intrinsic value.

First, it is distinguishable, unlike silver and platinum, they are not as shiny, and you cannot easily tell the difference between silver and platinum, a platinum buyer certainly doesn't want to be tricked into paying platinum price for silver. Second, gold is very inactive with most chemicals, making its appeal lasting and storage care-free. Third, it is dense, it is impossible to counterfeit a larger piece of gold just based on density alone, gold-coated lead won't work if the mass is larger.

So in terms of store of value, especially something that can be readily comprehended and embraced by the mass, it is a perfect pick.

SFWoman,

does the article mention the cost for such service? thanks.

I do see gold as first and foremost a speculative instrument. I'd like to keep a bit of it around and dump it when everybody else goes crazy over it. Ultimately, fossil fuel (and stuff made with fossil fuel like agricultural commodities, plastics, and metals) is what makes everything run.

Not advice of any sort, consult your own paid spiritualist/financial advisor before acting.

Gold is already at a 25 year high. Am I not a bit too late to the party ?

I cannot answer that. However, the dumb money has not left housing in force yet. When this happens, whatever left of the dumb money will go into another dumb asset class. Gold seems to be a good candidate.

To BA,

25-year high? Are you sure? You have to adjust the price with CPI. A dollar in 1980 is about 2.6 dollar today, adjusted for CPI published by our DOL.

"whatever left of the dumb money will go into another dumb asset class. Gold seems to be a good candidate."

Bubbleheads think alike :P

I won't hold gold long term, but I think there's still huge upside potential ahead of us. And the downside isn't that bad, when you think about how much it went for in 25 years ago.

o.t.,

Small claims courts are pretty straight forward and goes in front of a judge. The true craziness comes in with jury trials.

Ultimately, fossil fuel (and stuff made with fossil fuel like agricultural commodities, plastics, and metals) is what makes everything run.

However, this also means that governments will move heaven and earth to keep prices down. If oil goes to $300 a barrel (300% increase), our economy will likely to crash. If gold goes to $2500 an once (same 300% increase), it will just top the last peak in real term.

NOT INVESTMENT ADVICE

gold is always this alternative currency since we invented fiat money. Whenever we lose confidence in the fiat money, it roars back with full force. When the government and money printing agencies get their acts together and clean up the fiat mess, gold retreats into the background.

I personally think that Ben is not someone I trust in terms of taking care of the worth of my money.

I personally think that Ben is not someone I trust in terms of taking care of the worth of my money.

The question is: will inflation upset more voters than deflation.

Inflation = lower pay in real terms, deflation = no jobs, I think the answer is pretty clear.

Peter P,

Yup, political risk. Always scares the bejesus out of me. But what can I do? I'm essentially a third party person (true Progressive) trapped in a corrupt corporatist duopoly. Hopefully, things won't go crazy so fast that I have no time to respond. That's why I'm chosing to live my next five years out light and unencumbered.

Oh, what the hell, I'm flat broke right now (student loans = IRA), I AM the proletariat, what can the angry masses do to me?

Owneroc and Peter P,

Good points.

BTW, I think I jumped the gun on contrarian indicator. Hardly anyone is asking people to buy Gold. There is no Time article yet on "Why Gold will shine forever".

But it's so hard to truly eveluate real price of the Gold. What ratios to look for ? What metric to use ?

Owneroccupier,

There's just not enough gold to fill in for fiat money. Gold is still psychologically valuable because of its past history, but it just can't work as a carrier of value in any real sense.

But it’s so hard to truly eveluate real price of the Gold. What ratios to look for ? What metric to use ?

Finding the "real" fundamental price will do you no good because people are emotional beings. One must anticipate their next stupid move.

SFWoman,

I always felt the brown-nosers were living the unexamined life. While I've admired that unthinking quality in some of my weaker moments, I think I'd go complete stark raving mad if I had to live like that.

BTW, if you do buy gold, you need an exit strategy because gold really has less intrinsic value than corn (you cannot eat it).

NOT INVESTMENT ADVICE

Did anyone pay attention to what Heli Ben said today ? He gave a signal, that Fed may pause increasing the rates.

Not to parse what he is really trying to say etc, but how about the a new thread on "Let's assume Fed has paused the hikes. How will that affect economy in general and housing in particular ?"