Dow 36,000!

Jim Glassman used to write for the Washington Post. Back in the day I enjoyed his insights until he drank too much Kool-aid one day. His obituary will lead with this little title.

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16 thoughts on “Dow 36,000!

  1. First, the good news: Dow 36,000-40,000 is probable! Now the bad news: The Dow Jones industrial average is quoted in US dollars! If we continue to run the USD printing press and inject $3.5 to $5+ trillion in new currency, minivan and SUV sales will soar,(more good news)! How else can we take home our paychecks. DJ 36,000 would be a five fold move, from 7220 to 36,000. If the USD trades at 20 yen/$1 or .15 Euro/$1, then DOW 36000,(in USD) would be flat in “real” terms. A phone call might cost $5, McDonald’s may have a $10 value menu, Gold, (in USD), may trade at $4650 per oz. and be a loser if we convert back to USD. I have no idea of the right answer to our current “crisis.” Printing and throwing money at the problem can only lead to inflation, IMHO. Hey, Here’s an idea: add a zero to every dollar bill? Bring back the Grover($1000) with Ben Franklin on the cover, a Jackson worth $200? This would save US Government,(OUR!) printing costs, price in 1000% inflation, and mark the USD to market in compliance with FAS 159.

  2. Ken, look at the price list of gold in last 9 years and you will see you had 300% inflation in that period.

    http://66.38.218.33/scripts/hist_charts/yearly_graphs.plx

    That is nuff said..

    Euro on the date of January 3rd was 280 for ounce, US$ was at 268$ an ounce. Today’s prices are at 700ish euro per ounce and around 900$ per ounce.

    What market is saying and what is it doing are two totally diametrically opposite things. US has current inflation at 8% by shadowstat, currently that inflation has fallen sharply but i don’t count on having that deflationary process continue for too long. There is just too much faux capital pumped in.

    http://www.shadowstats.com/charts_republish#cpi

  3. look at the price list of gold in last 9 years and you will see you had 300% inflation

    look at the price of gold in the last 25yrs and you will see we had only 100% inflation in it. Thats only 3%/yr.

    too much faux capital

    So you think we should go back to the gold standard? why should an entrepreneur not be able to develop their ideas or a kid not be able to go to college because we haven’t found enough shiny rocks in the ground yet? That sounds primitive to me. I can see the Flintstones doing that, but why should we?

  4. “So you think we should go back to the gold standard?”

    No, money supply should be coupled with industrial productivity supply not a free for all lunch.

    Also you should understand that gold prices were manipulated for a long period of time. Dolar had a superpower status in currencies until 1999. when Euro was introduced, when euro came into scene my feeling is that investors strated to look the world with different eyes and started to differentiate their portfolios with greater care than before. Also 2000’s were the real boom time for Asia economies, China really emerged only lately as economic force.

  5. The money supply is made for consumption part of economy not for industrial purposes but that is not possible today because there is practically no production in US. Take example of housing, in 2005. residential builders almost got bankrupt because there lacked the need for new housing inventory. Now if there was no need for new inventory why had prices continued soaring? Isn’t it maybe theft by inflation from the part of banking(FED oligopoly) officials? The more there is inflation in any part of economy the more banksters rake profits, they are practically racketeering population by pumping more money into goods (housing market) that are practically regarded as corner stone of American “dream” (i would say nightmare).

  6. Ok, so when do you think the money supply should be increased and when should it be decreased?

    Btw, if you think gold has been manipulated for the last 25yrs (which it hasn’t) then how about the CRB Index of all commodities? That is up less than 50% in the last 25yrs. Thats about 1.5%/yr. So where’s the inflation? Inflation really hasn’t been a problem in this country since the 70’s.

    I think you’re confusing inflation with prices rising due to speculation (like in housing, gold, etc.). You’re confusing short-term speculative bubbles with inflation. To really get a view of inflation you need to look at the longer-term picture.

  7. Inflation is mostly speculative and deliberate. That is something that everyone should understand.

    “Increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money.”

    http://mises.org/story/908

    As for money supply, it should be set by two set of government central banks. One R&D for industrial purposes where industry is auctioning off direct loans + gets the incentives on that rates and other for general banking companies where they because banks can leverage they bet similary as industrial companies are but they do not get incentives. Central bank like today’s FED or ECB should be not giving official interest rate but the rate should be based on auctions.

  8. Inflation is mostly speculative and deliberate

    Oh really? The CRB index was set to deliberately rise 1.5%/yr for the last 25yrs?

    So you think that inflation has nothing to do with the general increase in demand for good and services due to population growth and the fact that humans consume more as they grow larger? These things have no effects on demand and hence rising prices?

    On your mises link http://mises.org/story/908 Shostak says:
    “Consider the case of a fixed money supply…If the demand for money increases against goods and services, there will be a general fall in prices”.

    This is simply wrong! It completely ignores the effects of increased demand for all good and sevices due to population growth and humans consuming more as the grow larger (they eat more!). Think about it, if there was a fixed money supply in a society of 1000 people and the population increased to 1,000,000 people, don’t you think that even the price of the smallest grain of rice would increase too?

  9. Actually I meant don’t you think that even the “demand” for the smallest grain of rice would increase too. My point is that as population grows it increases the demand for all goods and services. And that’s the basic cause of inflation, not money supply.

  10. Nice debate we have here. 🙂

    But to continue it, can you tell me how come electronics esp. PC’s had decreased exponentially in cost and increased exponentially in power. Had the demand waned for PC’s, no it has not. Matter of fact it is increasing at ever more faster pace. My personal thinking is that banking lobby, builders lobby, energy lobby, chemical lobby, food lobby are in a collusion in process of inflation. OK maybe i had overstated that but industry as global is against advancements and tries to have monopoly/oligopoly control over prices. Personally i think that if the government had direct interventions in IT industry the PC’s would not cost less and less every year but it would cost more and more like you see with heavily subsidized farming industry and builders industry. Government intervention just ruptures the competition process and inflates the prices in general (from money supply to free money for all that are in “trouble”).

  11. Yeah I get it Patrick, you seem to think everything is conspiracy, collusion, manipulation, etc. lol. I agree prices of some things drop due to the rapid pace of innovation, but last I checked PC’s werent included in the CRB Index (or shadow stats too for that matter!). But we’re talking about the cause of general price rises.

  12. To tell you truth i don’t really care much about inflation, collusive conspiracy deals, crooked politicians or anything else. All that matters to me is my business and that i continue profiting on markets. Life is too damn short to worry about Obama, CNBC soap opera, inflation, bailouts, etc. We wouldn’t follow this blog if we weren’t keen on trend following and trying to build wealth base so we wouldn’t depend on the some white collar politico criminal to tailor our life.

  13. I agree. I don’t have any control over what happens so I don’t care too much about what happens. And the best part is that no matter what happens, whether the system crashes or recovers, we can all profit from it by following the trend.

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