Science Forums 2

[HydrogenBond]

The economy is a sine wave. The appearance of this current "collapse" is merely the downward part of the cycle. This collapse in the stock market appears to be connected to a readjustment in the subjective wealth created beyond the real value in terms of equal worth of physical resources.

For example, the gasoline prices in the US were $1.50/ gallon higher two months ago. This change was not proportional to changes in supply and demand for gasoline, with both supply and demand roughly steady. The inflated and deflated prices do not reflect the physical or real volume. It is more of a subjective value added. This current economic adjustment is getting rid of the subjective fluff so it is better in proportion to physical reality.

Speculation or future's trading bets on the perception of the future rather than the tangible reality. If everyone wishes to make believe more value than what is real, we can make wealth, without there needing to be any physical reality backing. The past so many years inflated the subjective wealth index, now it is adjusting back to reality proportions.

For example, if a bunch of people buy a given stock the price of the stock will go up. The company doesn't have to change anything in terms of physical value, in the short term, to be valued subjectively higher. The subjectivity of the speculation is making magic wealth. The push toward retirement savings created a lot of money to inflate the value of all the investments due to demand.

The collapse of the housing market worked with this subjective affect. Banks were speculating on the housing futures. Banks don't loan money to lose money. They were speculating an inflated housing value market. Even if my house costed me X, and I added no additional real resources, it was suppose to be worth Y, for y-x=Z wealth without resources to back it up. The magic Z value, could then be used to refinance. This allows the homeowner to make magic money. The banks were increasing demand for housing with all the easy loans, inflating value across the board.

The banks were then suppose to get their magic money back with more guarantee of less default since people will fight for the extra magic Z. But the magic money didn't pan out, with the housing market draining the magic accounts. Now house values are closer to reality resources and banks have less magic money to loan. This came out of the retirement, magic. What we have now is a more realistic connection to actual resource value away from enhanced subjectivity.

I am not saying this is good but it reflects the reality of subjectivity. The Great depression also used magic money but it was done differently. We can't do that anymore. The system got creative and figure out new ways to make magic money wealth. It exceeded the safe amount requiring a reality check. The next up cycle of the economy will make more magic money.

Part of the problem is making magic money has become an art form. Every middle man that touches resource A adds cost or value to that resource, without the amount of the physical resources having to increase in direct proportion to the wealth created. I start with a yard of cloth. To inflate that with subjective value I can add a small piece of cloth with a designer label and now the subjective value inflated to double with only 5% more cloth. This subjectivity is being hit the hardest, with people having less magic money to buy product high in magic value. The downside of the economic sine wave appears to be a reality check in terms of physical resources. The up cycle will add new worth.