The Crash that Was
Reader Comment #2 on Chinese
Rooster Year Outlook, Part 2
February 21, 2005
About the collapse of the dollar--it did:
Most bearish analysts (including me) have thought that a severe
correction in the stock markets is long overdue. I predicted a crash
in January, 2005. In January, investors pulled out $29 Billion--and
stock prices barely budged. There should have been a crash. The
crash would have set off a series of events as you describe in Rooster
2. The crash didn't happen. What in the world is going on?
Well, believe it or not, the crash DID happen. Stocks are worth
about 40% less today than they were 2 years ago. You are probably
asking, "How can that be? Stock prices are about the same as
they were 2 years ago." I didn't say that stock prices had
crashed. I said that stock values had crashed. Let me explain.
Over the past couple of years, Alan Greenspan and the Fed have been
quietly devaluing the dollar. The vast majority of Americans haven't
even noticed. Only if one travels to, or trades with a different
economy do they see that their dollar is only worth 60% of what
it was two years ago. People in different economies who invest in
dollar-denominated securities have seen their securities shrink
40% in value.
American stock prices are denominated in dollars. Therefore, the
true value of American securities is 40% less than
it was 2 years ago. Stock prices have stayed about the same as they
were 2 years ago, but each of the dollars that
make up the stock price is worth about 40% less. This devaluation
means that stock prices must rise about 40% in order to have the
same value they had 2 years ago. The crash DID happen!
Stock values dropped 40% because of the devaluation of the dollar,
but stock prices stayed about the same.
Well, you ask, "Why didn't stock prices crash when investors
pulled out $29 Billion in January?"
The Security and Exchange Commission (SEC) has put a temporary trading
rule in effect called the "trade through rule." This rule
says that every stock trade must take place at the highest price
offered on any American exchange, not just the exchange where the
sale originated. This rule has the following effects on stock transactions
and monetary policy:
1) It damps the hell out of market volatility (especially downward
volatility) and makes American stocks very attractive to foreign
investors (because of the favorable exchange rate for foreign investors).
2) It tends to make stock values part of the national money supply
because the SEC "trade through rule" means that the government
is controlling what used to be free markets.
So, stocks are now part of the money supply, and with all that additional
"new money" from stocks in the money supply, something
had to give, and it did. The value of each dollar is less. The dollar
has been devalued.
So which is better? Free markets and a stock market crash or, government
interference, devaluation of the dollar, and no crash. You be the
judge. Personally, I think that Greenspan, the Fed, and the SEC
did a good thing.
About the lake triggering an earthquake--it could, but not
because of downward pressure:
The density of water is much less than the density of rock. So a
nearby mountain would exert more pressure than a lake. The downward
pressure of water in a lake is very small compared to the downward
pressure of water in the deepest part of the Pacific.
The way a lake COULD trigger a quake is by changing ground water
patterns below the lake and lubricating shallow plate boundaries
so that they could shift to relieve pressure.
About the earthquakes--they've begun and will continue:
During the solar maximum of 2000, the sun's
magnetic field inverted, and is now opposing the magnetic field
of the earth. The earth's magnetic field is the result of currents
of loosely bound electrons in earth's molten iron core. The magnetic
field is a force field (you can push one magnet around with a second
magnet). The solar magnetic field is messing with the earth's magnetic
field, and the currents in earth's molten core. This is bound to
break loose any of earth's plates that are on the verge. Will we
see the big one? The sun's magnetic field is no stronger in this
cycle than it has been in other recent cycles.
About your fearful fantasies--blame that on the sun too:
When the sun's magnetic field opposes the earth's, the strength
of earth's field is diminished. Along with the physical earth changes
that result, animals and people are also affected. Dolphins and
whales beach themselves, homing pigeons can't find their way home,
bird migration patterns are affected, and people's inner compasses
are slower to point north as people move around. This causes a feeling
of uncertainty in humans, and increases their fearfullness.
The change in each person is tiny, but humans are very sensitive
to changes in other humans. It is sort of a chain reaction. If you
are uncertain, but everyone else is "normal" you will
probably think you are having a bad hair day. But, if you are uncertain
and fearful, and every other human you encounter is also uncertain
and fearful, it snowballs in every person. It's times like these
that set up people for global panics and wars.
About global warming--blame that on the sun also:
Since the last solar maximum in 2000, the percentage of ultraviolet
light in the sun's output has been higher than in the recent past.
Haven't you noticed how much brighter things appear in the sunlight
recently? It's because of the sun's higher ultraviolet output. The
output is now high enough to trigger the color changes in those
"Transistion" sun glasses that turn from clear in shade
to dark in sunlight. When the ultraviolet output drops back down,
those sunglasses will stop changing from clear to dark.
In the spectrum of light frequencies coming from the sun, the ultraviolet
frequencies contain the highest energy. When the sun's ultraviolet
output surges, so does the total amount of energy reaching earth,
and Voilá!, the earth's surface and oceans heat up (and we
see all the changes that we blame on global warming). The earth
is warming because it is receiving more energy from the sun. It's
not necessary for you to stop driving your car.
Just realize that the sun is jerking us around right now, relax,
and try to not let it interfere with your thinking. And, try to
calm other humans that you encounter.
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