Thursday, 26 November 2009

Dubai surprise!

Declaration: I am not an economist, just a curious, bemused bystander.

I have to smile at this (to me) newly discovered world of finance and money. Since the current debacle started showing the early signs in mid 2007, I have taken an avid, if morbid, interest in the whole financial caper not least to try to figure out a way to preserve my own, modest, wealth whilst the powers that be are intent on destroying my currency and my country.

The one aspect that never ceases to amaze me is the regular faux surprise when grave announcements are made. The case in point, Dubai, announces that it will require to delay payment of its foreign debt until May of next year. In response, the pound falls, banks' share prices plummet, the FTSE takes a tumble and a myriad of other ripples process their way through the financial system. Now it seems logical to me that Dubai is in exactly the same position right now as it was 24 hours ago. Nothing significant has changed. It was not able to meet its obligations 24 hours ago or 24 hours before that. That is not a secret. So why, tell me, when the announcement is made, the financial system reacts as if it has only just found out? What is the psychology behind the person who decides to dump a bank share on hearing the news and yet was quite happy to hold that share 24hours earlier? Are we saying these share traders didn't know about Dubai, for example? What does that say about their financial prowess?

I accept that some news is indeed news which no-one could have known before and therefore a reaction is inevitable. But none of this is news. The debt-based, fiat currencies of the world are bust. They always were mathematically bust. You cannot have indefinite exponential growth of anything, including debt, on a finite planet. It will, with 100% probability, fail. It always has and it always will.

So why exactly is this a surprise? These are simply symptoms of a mathematically bankrupt model. They are to be expected.

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