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Berkshire Hathaway Inc. Message Board

  • Madeleines_Dad Madeleines_Dad Dec 3, 2003 12:58 AM Flag

    Roach: Debt

    America�s seemingly open-ended appetite for leverage remains one of the most disturbing imbalances of the post-bubble period, in my view. For households, the debt culture took on a new role in the latter half of the 1990s, as America�s consumption dynamic shifted from being income-driven to one that was increasingly wealth-dependent. The first wave of wealth effects was supported by the equity bubble. Once that bubble popped, however, wealth support then shifted quickly into property markets. The difference between equity- and property-induced wealth effects is profound: Apart from margin debt, the former is funded mainly out of a psychological sense of well being; in the case of property, mortgage debt and its ever-frequent refinancing are the principal means of extracting incremental purchasing power from housing assets. The income shortfall of a jobless recovery -- a far more serious problem today than in the recovery of the early 1990s -- only heightens America�s dependence on wealth-based, debt-intensive support to aggregate demand. Such a shift in the growth paradigm appears to have limited the post-bubble fallout in the early years after the stock market plunged. In the end, however, as wealth effects have morphed into a far more pervasive cultural phenomenon of excess leverage, the ultimate post-bubble payback may be all the more severe. That�s especially the case if America�s coming current-account adjustment sparks the predictable consequences of higher interest rates.

    Ht*tp://www.morganstanley.com/GEFdata/digests/20031201-mon.html#anchor0

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    • <I just have a hard time envisioning a worldwide abandonment of the dollar.>

      Replace 'dollar' with 'pound sterling' and you get a sentence someone might have said seventy-five years ago, I suppose.

    • Double counting:

      In January, the ^UAX started at 77.82.
      Today, it is at 112.21

      The trade of dollars to silver, and back has yielded a 44% return.

      The yield includes any currency devaluation. It was currency to metal to currency. That's the yardstick.

      Making any comment about the price of silver (measured in dollars) and then attempting to lump in currency devaluation as an additional return is DOUBLE counting.

      -Novice

    • "Without specific knowledge of all the issues facing other countries"

      Very true. That's why, as tair mentioned, that traveling is very helpful. It really helps to see with one's own eyes what's going on.

      As for the funds, I'd sacrifice some return potential to invest in someone I had some clue about. Like Mark Mobius, maybe, although I have no idea what he's up to. He just seems to have, from what I've known in the past, some idea of what's going on.

      I haven't owned any mutual funds since Michael Price quit, so I don't really know whets going on in other than indexed funds, including country indexes. There are country index funds, like the Japan Fund.

      Other than Mr. Price, the only other fund I ever owned other than indexes in John Neff's. They were both dissimilar to me that I concluded it was OK at the time.

    • "I just have a hard time envisioning a worldwide abandonment of the dollar"

      >me too...as everybody here knows,I came back to the Dollar at 1,1763 �...but the problems that would create

      -a Gold Dinar planed by the Islamic world
      for their Oil-Exports
      -Russia letting itsself pay their oil in Euro

      could have a huge input.

      Do I get nervous at 1,21� for one Dollar?
      You bet!!{;>(

    • Interesting point Paraguay.

      Don't get me wrong, I wouldn't be at all surprised to see the dollar continue to weaken for the reasons already discussed here. I just have a hard time envisioning a worldwide abandonment of the dollar.

      Saludos,
      Senior Speilbergo

    • El _senior..."He told me that the banks would have stores of Dinari's (sp?) and dollars. No Euro's, yen, or anything else"

      That is the REAL problem:everybody HAS/HAD already Dollars...so with the world -trade going third/third/third everybody HAS TO BUY those other currencies....hence creating demand.Same to centralbank around the world....many just held Dollars as reserve...only now creating demand because they shift towards a greater diversification.

      Your friend was right....everybody allready "swims" in Dollars!{;>(

    • I have Buffett's feeling with the dollar. I dont like the fact I made 40% by getting out of dollars, but until we fix the deficit the US is in trouble. I am all out for making money on Silver for the real reason, the silver deficit, it bothers me that it has 2 reasons to purchase it. I only need the primary reason and the reason Warren bought, The Silver deficit and the coming silver crunch.

      Good Luck

    • While we are (sort of) on the topic.

      I had lunch today with a friend who just came back from serving a tour of duty in Iraq. He told me that the banks would have stores of Dinari's (sp?) and dollars. No Euro's, yen, or anything else.

      When buying or selling things from the people, they only want US dollars. Not euro's, yen, or anything else.

      It's hard to imagine the dollar becomming "worthless" anytime soon with that kind of demand for it.

      -Senior Speilbergo

    • Confused again? go look at silve spot in jan. go look at dollar value against other currency in jan. You will find your double counting comment is plain wrong.

      Good Luck

    • He bought 40 billioin of berkshire? sec filing please.

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