In Plain Terms - HOW WE GOT HERE
The article which you are about to read was excerpted from a post made by William (Bill) C. Cowart, an older, wiser, not-easily-fooled (hyper-hyphenation!) type of fellow. While I was away at college and graduate school, Mr. Cowart, a bright, inquisitive soul, was actually getting a real-world education. The post appeared on the INTERNAL ENERGY PLUS Yahoo! Group (http://health.yahoo.groups.com/group/INTERNAL_ENERGY_PLUS/ on 09/09/09, and it is being re-printed here, unedited, in THE GLOBAL FUTURIST (http://TheGlobalFuturist.blogspot.com) for the benefit of many individuals who are concerned about how the US Economy came to be where it is, and what we might do to break the recurring cycle of history. Bill loves to tell a story, in the tradition of a Mark Twain character. He is to be praised for his amazing candor. Thank you, Bill.
-- Douglas Castle (http://aboutDouglasCastle.blogspot.com) .
By the way; I write for THE NATIONAL NETWORKER Newsletter. Please get your free subscription at http://twitlik.com/OK. -DC
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I just read a news article, Taxpayers face heavy losses on auto bailout , . What shocked me was that the Government basicialy bought in at the high price of the stocks in 2008 . And sad to say that is the way many look at something economialy. They are now saying they will loose a huge sum of money, just like many did with their 401Ks. And there is a reason for this.
Let's look at a commodity, I have on hand at this moment. I have a stack of @ X12 X 16 foot lumber, selling for say, $18 each in the lumber yard. But my @ X 12 X 16 foot will have more value than the ones in the lumber yard. Now I want investors to invest in my sawmill, So I sell them on the fact that my boards are more valuable than those at the lumber yard. Why, they where cut with a chain saw mill, they are unique, one of a kind. Any one can have a deck on their home, but it is extremely rare someone has a deck cut with an Alasakan Saw Mill, and more rare when it is run in a carriage like the ones used a century ago.
Now I am capturing a nicth market,of those who want something others do not have. We are looking at doubling our money, selling the boards for $36 each, and the investor wants in on the action, buys a lot of stock in me.
You buy in we sell a few at $36 each, then the housing market crashes, and I am forced to sell for $14 each, now loosing money. Did you loose $20 on each board you invested in, or $2 ? In reality, you paid $16 for each board you invested in, the $36 a board was on intregent value, was never realy there. If a wise investor took that money when it was at $36, then the money would have been real; otherwise it was just intregent value. And in the end to futher prove that, he can only write off $2 a board as a tax loss. Or in plain english, he counted his chicks before they hathed from the eggs.
many people over a period of thirty years put say $50,000 of their real money earned throught their labor into a retirement system, getting excited as the intrengent value rose. What they failed to see was that if not taken in cash at its high, it was only worth ,if even, the paper it was written on. Or you can not take a product worth , as boards $16 each , randomly say they are worth $36 each, plus assets to make them , say a total of in a case like mine $10,000 stock and equipement on hand, and say it is worth $20,000. Even with a good marketing plan, in this case selling arrognce of having what others do not have, all in ones head; the $10,000 is hypothetical. It is only worth the market value at the moment.
What that means is say GM at the moment they where bailed out was woth exactaly nothing, as they where belly up, finanicaly speaking, not worth one red cent. They never was worth it, and never will be. But people , both private citizens and now the government choose to belive some maject would happen, and they would become worth something. And to complicate it all a bit worse, their lenders, base the loans, to keep them operating, on that intregent value . Them all , when it goes bad, claim to have lost something real.
But now, what has happened to the $2 a board you lost, investing in Poorboy Constructions, sawmilling operation ? ( that is my hyprothetical name ) Well as boywonder and CEO of such an impressive operation, I need perks, so I could impress more buyers and investors, to creat this intrengent value. After all can my wife be seen driving around in a ford auto, no; she needs to be driving around in a Mercedes , on fuel from the refrinery, that Poorboy Construction ownes, as we are diversified. Yes, diversified, wow, another reason for investing in PBC, of course all intregent value. But that is where the money the investor lost went to, into personal peks, and other extravanget versications, so I could live a life of riley.
Oh!!!! in reality my wife in real life does have a mercedes, of course it is 25 years old, and it does run on fuel Imake using a bio diesel processor, I built myself. And in a building I built myself, actualy utting the lumber with a chain saw for real.
But if I make a point, we have come to the point we no longer invest in what is real, instead we invest in intrengent. And whast is worse, and I have two Granddaughters, I am responsible for, now in H/S , this is what we are now educationg our children in. Or an education full of intrengent values, not real values.
And if I make a point in all my chattering, we need to refocus ourselves on what is real both physicaly and physocologicaly speaking. My thoughts and opinions, Bill C.
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Thank you for setting the record straight, Bill!
Respectfully,
Douglas Castle
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