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Where did all the money go?

Idea threads
A

Anon3587x

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The economy in the doing poorly right now as the media reminds us everyday, but I don't really understand how the situation became so bleak.

If the television didn't constantly show us crashing stocks, and how many people are losing their homes, wouldn't everybody else make a better effort to keep their homes. It seems like people are saying, "My house isn't worth what I paid for it, so I'm going to let the bank have it back."

Is the main problem houses were selling for way more then what they were worth, and banks gave loans they shouldn't have. Now banks are not getting their money back? So they are trying to make the rest of us panic when it is really just them going downhill?
 
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GlobalWealth

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Bateati,
I would suggest picking up a few books about economics to help shed some light. "The History of Money" by Jack Weatherford and "The Mystery of Banking" by Murray Rothbard are 2 interesting books that will answer a lot of your questions.

It is good you are asking these questions as most people just sit around with their head stuck in the sand. Being inquisitive is good.

Right now there is about $1.8T in money on the balance sheets of corporate America. This is an all time high. Companies aren't spending money because of uncertainty. They don't know the govt's next move so they sit and wait. $1.8T is a lot of cash just waiting.

You have a wrong assumption about gold. No world currency (USD included) is tied to gold. We have now what is called fiat currency, which basically means it is a debt note guaranteed by the govt. It has no intrinsic value beyond the cost of the paper.

Gold is the oldest form of money and the only form that has survived thousands of years. It is and can still be used as money, but world currencies have nothing to do with gold except that you can exchange the notes for gold. If a client told me he wanted to pay in gold, I would offer a discount.
 
A

Anon3587x

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If you don't mind me asking your opinions, how bad do you think this situation is on a scale of 1-10?

Sorry for the million questions, just trying to take advantage of the opportunity this forum gives me. I don't trust T.V or random internet articles for definitions. I somewhat have a sense of who you people are, this trust gives me a stronger desire to really comprehend what you say as opposed to someone I don't know.
 
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GlobalWealth

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Gold and paper currency generally move opposite one another. Meaning as the dollar drops in value, gold goes up and visa versa. This isn't always the case, but overall this is how it works.

A better way to look at it is like the other post about the price of houses in gold ounces. How much did a house cost in gold ounces 50 years ago, 25, 10, or 5. You can do the same comparison for oil, land, stock market valuations, or nearly any other asset class. Gold is a store of wealth. As inflation increases, asset prices go up (there is usually a lag to this though). Keep in mind, inflation is when money supply outpaces productivity. Price inflation follows, but it isn't the same thing.

As for studying economics, I personally think every human being on the planet should study economics. Economics is basically the study of motivation. It isn't just about money. By understanding basic economic principles like supply/demand, money supply, velocity of money, and various macro conditions, you will gain a perspective in your business and investing activities that most people don't really bother learning.

Honestly, I don't even want to get into the subject of our economic problems right now. It is a huge subject and rife with political pitfalls. My problem is that I love this subject and could discuss it all day. But then I don't do anything else productive, so I need to leave it alone. You really need to start reading some books about economics to gain the perspective and formulate your own ideas.

A couple of economic books I would recommend are "The World is Flat" by Friedman and "Freakonomics" by Levitt. Both books are pretty entertaining and teach with stories. You could also start looking up works by various economists like Adam Smith, David Ricardo, Ludwig von Mises, Friedrich Hayek, and a few others.

To answer your question, 'how bad is it', I would say 9-10 truthfully. However, with that said, I always look for the positive and wherever there chaos, there is opportunity. IMO, there is entirely too much govt influence in many countries around the world and this causes major market inefficiencies. But for someone who understands economics and is willing to take action, there are always huge opportunities where there are inefficiencies.

For example, in August, I am going to look at some apartment buildings in the US. Due to the RE market problems (govt influence IMO), prices are very low. I am seeing very nice apartment buildings with 10%+ cap rates. Some as high as 15%. This is abnormally high. There is going to be a huge amount of wealth created over the next 5-10 years. I intend to participate.
 
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Runum

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IMHO our economic problems are due to a lack of trust. The sub prime mortgage loans were sold as A paper bonds to investors and they clearly weren't. Then the loans began defaulting and the house of cards(lies) began to collapse. Banks are not as willing to loan money. Companies are not as willing to expand and hire. Consumers are not as willing to freely spend. The whole, world wide, system is suffering from uncertainty and no trust.

In my own world I am still buying RE, still making deals with my local bank, still renting to consumers, still hiring laborers to do work, standing up and being true to my word. I can tell my tenants have been nervous and struggling now for about 2 years with no end in sight.:cheers:
 

Runum

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Oh yeah, I do agree with GW. It is a serious problem. However, I can only do my small part to help the situation. I have my total disaster plan in effect for emergencies. I choose not to duck and cover but to look for opportunities. It's too much of a downer to focus on "the sky is falling" all the time.
 

GlobalWealth

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IMHO our economic problems are due to a lack of trust.

I would certainly agree there is a lack of trust. But what is the root cause of this lack of trust?
 
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Runum

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I would certainly agree there is a lack of trust. But what is the root cause of this lack of trust?

IMHO the cause of the lack of trust is the violation of that trust on such a massive scale that we can't fathom. With the fiat currency the world wide economic system has to be based on trust. Even the world's governments are not trusting each other on a larger scale than I have perceived before.
 

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IMHO the cause of the lack of trust is the violation of that trust on such a massive scale that we can't fathom. With the fiat currency the world wide economic system has to be based on trust. Even the world's governments are not trusting each other on a larger scale than I have perceived before.

Witht this, we can agree 100%. I since we cannot make much of a change, how do we profit?
 

Runum

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Witht this, we can agree 100%. I since we cannot make much of a change, how do we profit?

I was under the impression that you already were. I have not stopped looking for undervalued assets to acquire and use to my benefit.

Perhaps, along with the trust issues, more people don't believe they can trust themselves. I am trying to be bold and take the risks that others will only briefly ponder.
 
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GlobalWealth

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I was under the impression that you already were. I have not stopped looking for undervalued assets to acquire and use to my benefit.

Perhaps, along with the trust issues, more people don't believe they can trust themselves. I am trying to be bold and take the risks that others will only briefly ponder.

I am profiting. But always open to new ideas. I would be exceptionally arrogant to claim I had the answers. I will happily learn from others who are doing great things.

I am trading in the markets now looking for undervalued companies.

I am going to be looking at some apartment buildings in NC that are getting over 10% cap rates.

I am consulting with clients who are looking for options for protecting their assets through offshore and domestic LLC's, corporations, limited partnerships, trusts, private placement life insurance, and various other asset protection techniques. With the uncertainty today, clients are looking for options to protect themselves from risk.

I am also looking into various private business investments. I will be meeting with some entrepreneurs over the next couple of months to investigate some opportunities.

Maybe I do too much, but I am an entrepreneur to the bone. Everything else revolves around this passion (not saying its good or bad, it just is).
 

Runum

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Sorry, Bobby, I did not mean for my last statement to be aimed at you. It was just a new, generic, thought that popped into my mind and I posted it. You are, by far, doing more than I. I am just looking into my geographic area and my own little niche. You are definitely looking at a more global perspective. I, like you, am always open to learning from others. Sorry for any slight.:cheers:
 

GlobalWealth

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Sorry, Bobby, I did not mean for my last statement to be aimed at you. It was just a new, generic, thought that popped into my mind and I posted it. You are, by far, doing more than I. I am just looking into my geographic area and my own little niche. You are definitely looking at a more global perspective. I, like you, am always open to learning from others. Sorry for any slight.:cheers:

No slight taken whatsover. Just explaining my situation. We can all learn from one another. I am frequently in awe of many of the entrepreneurs on this forum with the courage they have and the willingness to take action, you included.
 
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G

Guest3722A

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I would certainly agree there is a lack of trust. But what is the root cause of this lack of trust?

I've been thinking about a business idea that may help with bringing trust back. This idea is to go back to the old days and open a fruit stand that only sells peaches to natural born citizens who can prove through their long-form birth certificates that they are natural born. This idea would only work without forgery of course.
:)

This imo would help towards bringing at least some of the trust back.

Does anyone care to help in naming this fruit stand? I was thinking something like "IN Peach" kinda has a ring to it
 
G

Guest3722A

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If anybody reading this is interested in sitting through a university taught economics course provided by Yale, here's a link to an entire semester on financial markets taught by Dr. Robert Shiller himself!

Financial Markets | Yale Video Course

Be aware though that there is a lot of calculus.
 

Pinnacle

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I will check out those references Global thank you.

From what I'm starting to understand all these wounds seem self inflicted and were preventable.

I'm starting to see there are different types of entrepreneurs.

There are those who profit off totally understanding the situation , aiming with precise shots to the heart. It is those aiming for the heart slowing us down at the moment, they are safe with their money and understand the situation causing them to be cautious.

Then you have those who set up shop and shoot randomly, trying to hit whatever they can. These people going all out are keeping the cash flow going because they don't understand the situation completely and therefore are not acting any different.

Just an assumption I guess.

You are absolutely right, actually.
 

veli

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Bateati wrote: "I feel like if t.v didn't constantly show us how bad the stocks are getting, and how many people are losing their homes, everybody else would be making a better effort to keep their homes. It seems like people are just saying
"My house isn't worth what I paid for it, so I'm going to let the bank have it back.""

I think there is no secret that this has actually escalated the economic trouble in US as people knowingly forfeit their loans because they will only lose their house, and will be free to start over. Im not sure how it is in other countries, but here in Norway if you have a mortgage on your house, you will still owe the bank even though you stop paying and the bank takes the house, and then sells it. If its sold for less than whats left of the mortgage, you will still owe the remaining sum, even though you are without a house. And, in my opinion this is how it should be as it mean you must take responsibilty for your "investment", its really to easy just to leave a house and let the banks deal with the problem.
 
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