Quote from: finack on June 24, 2011, 07:34:26 PM

Quote from: Downside

We predicted the mortgage crisis in October 2004, again in 2006, again in 2007, and said it was here in March 2008.

This rather plays in to the criticism of many long term bears, in that it's said if you predict a big crash, correction or recession sooner or later you're bound to be right at some point and you can accept your 15 minutes of fame. Trying to act on those regular predictions can be much riskier though, as the classic quote goes "Markets can remain irrational a lot longer than you and I can remain solvent".

Agreed. But that wasn't the situation with the housing crash. There was this weird mind-set that housing price increases created wealth, while in reality they were just a form of inflation. What we saw was that historically, the median house sells for 2 to 2.5x the median income. When that number hit 4 across the US, and 10 in some areas, it was blindingly obvious that something had to give. Nobody could make those payments.

The housing crash was delayed two years by Greenspan, who had the Fed cut interest rates when it should have been raising them. ("It is the job of the Fed to take away the punch bowl just as the party gets going" - William McChesney Martin, early Fed chairman.) When the crash came, it was much worse.

The dot-com crash was straight cash flow. There were people saying "revenue doesn't matter." What mattered was "clicks". When the initial funding ran out, so did the company. It was a very strange time. I'm in Silicon Valley, and watched it all happen.

The current real-world economic situation is so driven by public policy that we've given up making predictions.

Quote from: finack on June 24, 2011, 07:34:26 PM

Quote from: Nagle on June 24, 2011, 06:22:54 PM

It's amusing watching the Bitcoin community flail around. Most of the classic financial disasters are being re-enacted in miniature. We have pyramid schemes, tulipomania, bucket shops, pump and dump... This would be fun if it were an MMORPG.

I agree that this makes the entire phenomenon fascinating. The communities openness to such transparent hucksterisms like the pyramid schemes seems to speak volumes about the main interests in bitcoins. And while I'm not schooled in such things, this also seems to be a rather unique twist on the pump in dump where there appears to be no central actor with the pumping actually done by all the market participants themselves through some kind of ad hoc understanding. It really feels to me like it's been taken hold at least in part by penny or otc manipulators. Very interesting to watch, seldom do you get such a raw view of it because of the legal implications. I just hope nobody is risking their retirement of college fund.

Agreed.