Friday, October 3, 2008

Revaluation Not Market Breakdown

In the world that the everyone is currently trying to save with bail outs and cash injections a person who worked hard to qualify in a career that produced a real product (in this case the word 'real' means its demand is not related solely to the financial return it provides) or provided a real service was a poor person. Sure you might be a dentist or a teacher but your value to society, as determined by your purchasing power, was deemed to be far below someone who used a vast array of marketing techniques to extract the maximum price for whatever was being sold no matter what its value could possibly be in relation to what is actually earned on the average.
Alan Greenspan's misunderstanding of the role of money and his hunch that technology and globalisation had led to a new productivity that had overcome inflation meant that there was for far to long a new bundle of printed paper to make the sums add up and keep the game rolling on. What the market does eventually, no matter what interferences are undertaken to distort and slow down this operation, is reward action at the margin based on its product of demanded goods and services. For the duration of Greenspan's Ponzi scheme where the seemingly risk less return became the product the purveyors of such a service rewarded themselves handsomely for their actions. Now that the service these people provide is actually providing a negative return they will find themselves revalued by the market and the people who provide services that are still in demand in this new environoment will be revalued in real terms. The hedge fund executives will be revalued out of the houses and apartments they occupy into the appropriate parts of town. Relative prices might be changing quickly at the moment and in a downward direction but the end result will be an environment where the providers of services that are still demanded will be able to purchase goods and services they require. A teacher will suddenly be able to buy a house again close to the part of town the school is in which is hardly a world to be feared.

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