London 2012

The 2012 Summer Olympic Games, otherwise known as London 2012, is set to take place in London, United Kingdom, from 27 July 2012 till 12 August 2012. During these 17 days, athletes from all over the world (204 nations) will be pitting against one another to win the ultimate glory for their countries.

May the best athletes win.

Is the world heading for a great depression?

First of all, I would like to mention that these are just my opinions. They may make sense, they may be nonsense. All that I ask is that you "filter" these according to your logic and think for a moment whether they sound reasonable or whether you should just ignore it.

I for one hope that the world isn't headed for one as countless would suffer if it ever becomes true. Then again, if what I say makes sense, then this might become a self-fulfilling prophecy...which I again hope does not come true too. Finally, I am in no way a scholar of economics or anything whatsoever related to it. I am merely a regular person holding a bachelor's degree in some weird field of science. Anyway, here's my make of things...

Don't you think that practically everyone around you is talking about "investing"? Invest in stocks, invest in forex, invest in properties and god knows what else. With all these talks around, are there anyone out there who would stop and think for a moment...should we really be doing that? Is it wise or is it illogical at the moment?

With our current situation, countless are being jobless and the numbers are rising, college-grads are graduating only to find that that piece of paper is practically useless. The stock market is currently so volatile (although it seems to be holding...but with what??), countries one after another are giving out noises and sounds (increasingly debt-ridden) which seem like a foreboding omen. Finding a place to live with a roof over your head just about costs you an arm or a leg or perhaps a life-time (a couple of hundred thousand per home with a loan that will require you at least half of your lifespan to pay off...)??? Just what exactly is reality and fact?

A good article to read before we continue would be this Wikipedia article, The Great Depression.

If your done reading that article, then answer this question of mine...

How many of the points in that article seem to "click" inside of your head when you read them?

"The depression originated in the U.S., after the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday)."

• In which market this occurs does not matter. It is merely a spark to trigger the collapse. And the fact that the stock market crashed meant that it was impossibly high "relative to the general public's mentality" at prior to the event. Possibly what those people were thinking before then would also be "Invest, invest, invest?...It is safe to invest now....the market is poised for a recovery...I won't be 'the greatest fool' as long as I can find someone to sell this piece of paper to."
  
  Actual Worth vs Fake Worth
  Company A's current stock price is $xx.xx. So if I have 1 lot (1000 shares) of Company A's stock, my "worth" would be $xx.xx.
  - This in my opinion is false. The actual worth would be "you currently hold 0.xxx% of Company A (1000 shares / Total number of shares of the company). If the company is profitable, then your "worth" would increase. If the company goes bankrupt, then your "worth" would be whatever that's leftover. The current stock price is merely a reflection of what "people" view its "worth" as. It can fluctuate and if no one wishes to buy it...no one at all...then it is worth nothing but only as much as the company is worth.
  

"The Great Depression had devastating effects in countries rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%, due in large part to the Smoot-Hawley Tariff. Unemployment in the U.S. rose to 25%, and in some countries rose as high as 33%.

Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60%. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as cash cropping, mining and logging suffered the most."

• As we seem to be feeling that now, unemployment rate isn't pretty at this moment and countries are desperately trying to avoid that...but at the cost of becoming increasingly debt-ridden.
  
  Prices of stuff are becoming increasingly expensive. Our work salary increase doesn't seem to be keeping up, the gap between the rich and the poor seems to be increasing as well.
  
  So the question is...how high can prices go? Just like the stock market, once people find that the price is ridiculous, they will no longer buy it and it will drop back to "normal". So just like that, my question is, how high can inflation of prices for stuff go? Shouldn't there be a point where people start thinking....the price of this is ridiculous.
  

"The consensus among demand-driven theories is that a large-scale loss of confidence led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets. Holding money became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand."

• In my opinion, a depression is merely something that is inevitable. There is no way to avoid it, only delay it. The current financial countermeasures are doing just that...to delay it. The longer it is delayed, the more debt-ridden the country becomes (due to the flood of money), prices of things keeps on increasing until breaking point. And when it snaps, the depression occurs and if it takes long enough before it happens, then it becomes a great depression.
  
  The depression at best is acting like a "reset" button...to bring things back to normal...to reset the "value and worth" of stuff. Everything with regards to money is relative. In the past, $1 can buy you a decent meal but now that same $1 cannot. In the past, our parents can raise a bunch of us up with their meager amount of salary, but now we cannot even raise up one.
  

"During the Crash of 1929 preceding the Great Depression, margin requirements were only 10%. Brokerage firms, in other words, would lend $9 for every $1 an investor had deposited. When the market fell, brokers called in these loans, which could not be paid back.

Banks began to fail as debtors defaulted on debt and depositors attempted to withdraw their deposits en masse, triggering multiple bank runs. Government guarantees and Federal Reserve banking regulations to prevent such panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.

Outstanding debts became heavier, because prices and incomes fell by 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By April 1933, around $7 billion in deposits had been frozen in failed banks or those left unlicensed after the March Bank Holiday."

• If my memory did not fail me, in the past according to my parents, they needed to have at least 30% or more upfront to take up a loan for a house. Now I think its around 10% - 20% upfront and you can grab a loan.
  
  If anything happens, the amount of money you owe will remain the same while the amount you can earn to pay off the debt would drop (in the event of a depression). This would definitely increase the amount of foreclosures. And with the bank unable to retrieve back the loan, they become illiquid and fail. That is a natural cause and effect which cannot be avoid.
  
  But my point is this...lately, how many of us have "actual money" in our hands and not "borrowed money"? A company on loan no matter how big...if they do not have enough funds to "pay off" their debts, will be forced to close down in the event of an economy downturn and had their loans called in.
  
  The money in our wallets are ours, those we keep in the banks, in a sense is still ours, but in reality, that money is merely a figure that is kept in storage while the "physical entity" is being "loaned" out to another person or in another person's wallet. Of course, the amount of money is a constant that is determined by another factor - how much gold the country using that currency holds in its reserves...and how much a quantity of gold is "pegged" to that currency. (This is all information I picked up from articles...and if I'm wrong, then please correct me.)
  
  Anyway, I'm digressing. So back to the point, your money is still your money...whether it is in your hands or in the bank. You do not need to worry about that and "run off to the bank". If in the unfortunate event that the bank collapses, then perhaps you might not recover "all" of your money but only "that which is guaranteed by the government". Or perhaps you can still recover all of it. That we won't know until it actually happens.
  
  The most important thing I wish to bring across is "true value" vs "false value". In my opinion, the money you have or own is "true value" to a certain extent. "False values" are things like property prices, stock prices, food and commodities...etc. All of them merely have a "face value" which will disappear in the event that demand drops or vanishes. If no one is willing to buy your property for 1 million. That property is not worth 1 million....regardless. In the event of an economy crash, the property value WILL definitely drop.
  
  If you had been so unfortunate and took on a loan to buy that house, paid $400k upfront and loaned $600k, the market crashed and the bank called in the loan. You, in reality, still owes the bank $600k. If the market crashed slightly, then it still might not matter, but if it was a severe crash and the house is now worth only $100k, then your in "deep" trouble. Cause even after selling the house, you still owe the bank a freaking $500k. The house is "no longer worth 1 million". Your networth is NOT 1 million. The same goes for stock prices, food and commodities...etc.
  

The whole motivation behind this article of mine is simple. I AM questioning the situation we are in at this moment. I AM questioning whether what other "financial experts" are claiming is true. I may not be right, but I am using my own brain to think. Is it really a good idea to "invest, invest, invest" using "borrowed" money? Are those people telling you to "invest" really doing so for your goodness sake? Will you end up being "the greatest fool of them all"? Why are "financial experts" desperately trying to convince you that the market is still sound? Why do they want "us" the regular peeps to go in to support the market if it is still sound? Wouldn't they be just fine if we left it alone SINCE it is still sound?

The fact is...the market movers aren't the financial experts, but rather us...the regular peeps. If our mentality as a whole sees things in a bad light, things will become bad. If we see it as good, it will be good.

Despite things as such...I am not advocating that you not spend at all...because that will really hurt the economy and things will spiral downwards into a self-fulfilling prophecy. But rather, think about the value of something...is it truly worth that price? The economy as a whole depends upon us, the government as well as the commercial industries. One cannot be rid of the others and cannot purely benefit at the cost of the others.

And regardless of what, I feel that one should plant our feet firmly on the ground. We should not invest with "borrowed" money and burden ourselves with "unnecessary debts" with the mentality that it will be "worth more" in the future...for ARE YOU certain that it will be so?

- BuLaDiFu -

Amelia Earhart's 115th Birthday

Today's Google home page features Amelia Earhart, an American aviation pioneer and author. Amongst her noteworthy accomplishments include being the first woman to receive the U.S. Distinguished Flying Cross as well as being the first to fly solo across the Atlantic Ocean. Sadly, during an attempt to make a circumnavigational flight around the world, she vanished somewhere over the Pacific Ocean while heading for Howland Island.

Gustav Klimt's 150th Birthday

On today's Google home page hangs a bright golden-colored painting. In it, you can see what seems to be a couple kissing as well as the words "Google" incorporated into the background of the painting.

Upon further digging, I realized that this doodle is to celebrate an Austrian symbolist painter, Gustav Klimt's 150th birthday and that the doodle was a derivative of one of the painter's artwork called "The Kiss". The most prominent feature of Gustav Klimt's style is his use of a combination of oil paint and gold leaves in his paintings.

HDD crashed...

If you've been wondering why I haven't updated my blog lately, its because my hard disk decided to fail on me since a few days ago. Now I'm busily trying to get a new hard disk, reinstall everything...as well as see if i can salvage the data from the hard disk that crashed.

Hopefully I can at least get back the screenshots and vids that I took of "The Secret World" as well as my bookmarks in IE and firefox. Its really a pain to lose all those bookmarks....hahaha. Remind me next time to backup my data often and change new hard disks at least once every three or so years. Apparently, that's how long a hard disk can last from my perspective.

- BuLaDiFu -