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October 28, 2008

Comments

Fred

I think you are correct about most of the points on the current economic crisis. The fundamental problem is "lack of safe investment options".

The sub-prime mortgage is fuled by huge surplus in the capital market (35 trillons USD according to IMF) in 2001. These are the saving of the world from oil recipts in Arab countries, China/Japan trade gains to the pension funds of the Western countries saved over the last 50 years. This huge sum of money found its way to stock market and bond market where the finicial genius make them think it is safe by repackaging these low quality loans as good ones. Does it not sound like the "poisionous milk product" from China?? When things are going well until late 2007, this global pool of money (on paper) grew to 75 trillion USD!! Now, there is really no additional goods and services that worth that much!! So people start realizing this is just a ballon ready to pop and soon the valuation of the stock and bond and house start to crash. Yes, this is ineed a global issue as all of the banks in the world are involved in this scheme.

Too much money chasing too few good investment oppourtunity is the root of the problem. Who is to say that the goverments will be able to do a better job selecting the investments for the future? We do not need extra 6 trillion dollars of goverment investment as there are already 40 trillion (after the crash) of cash sitting on the sideline. People are always persuing a better quality of life for their own and their family. Space travel is like early air-travel of the last century. As businesses retrenched, future technology in biomedical research and IT will continue to improve and increase productivity. This free up people's time to explore beyond his/her limited existance.

During relatively peaceful time of the last 60 years, the large encomic cycle continues to boom and bust. As the Chinese saying -- "When thing reach its peak it must Reverse". The world will not end due to bank failures or country defaults. The dangers is that uneven wealth distribution can cause social unrest and further distroy the economic value system. You can spend 6 trillion in wars that can destroy all infrastructures of the world or you can use it to build something of vaule for all mankind. Since we are living in the "Rocket City", we would like the world to spend more money on Space Exploration. A space race is good for economy!!

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