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LinuxPlanet: .comment: Surprised by Poverty

Aug 22, 2001, 12:54 (12 Talkback[s])
(Other stories by Dennis E. Powell)
"History demonstrates the accuracy of what some of us were saying last year and the year before: That things like the equities prices in the tech sector were based on ridiculous assumptions, and sooner or later someone was going to notice this, pronounce the emperor naked, and it would all come crashing down. Which it has done and to some extent continues to do.

It's very much like the story of the counterfeit money in Morocco. The way this story goes, Americans visiting that country on buying trips a few years ago would use a color copier to produce fairly large sums of counterfeit U.S. currency. It wasn't bad looking stuff, though it wouldn't make it undetected for very long in the U.S. But in more remote regions of a foreign land, it would pass for the real thing. It worked. It worked so well, in fact, that there are nice little local economies there that are based entirely on the phony cash. It's a decent portable store of wealth, for as long as everybody involved in the transactions has faith in it. Of course, if the whistle is blown the whole local economy will collapse and whoever is holding the "currency" at the time will be out of luck. In this particular situation, there's no reason to believe that the whistle will ever be blown. But that cannot be said of the American stock market.

It was inevitable that one day someone was going to say, "Hey. Aren't these companies we're investing in supposed to make money at some point, rather than lose huge amounts of money all the time, for as far into the future as can be seen?" And somebody else was going to say, "Once everyone who wants one has a computer, can we really expect people to blow a grand or more on a new one every single year?" Whereupon the unsettling noise of cracks forming in the flimsy foundation were heard. They broadened quickly. Some people escaped with their lives, while others were crushed.

A whole lot of money, much of which had existed only on paper, simply disappeared. Ceased to exist. People who were surprised by wealth were even more surprised by its departure. The smart ones didn't behave, when they were rich on paper, as if they were rich, and therefore do not now face huge debts they have no way to repay."

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