Heard in the Halls at GMU

by on October 1, 2008 at 12:58 pm in Economics | Permalink

R: "I’m quite pessimistic about the current financial system.  I’ve been buying gold."

A: "Gold?  That’s not pessimistic enough.  I’ve been buying rice."

12 comments

nelsonal October 1, 2008 at 1:16 pm

Bah, lead and steel are the only investments for a true pessimistic worldview.

dj superflat October 1, 2008 at 1:20 pm

if you’re really pessimistic, guns and ammo, right?

Steve October 1, 2008 at 1:31 pm

Andrew, ever read the “Great Hedge of India?” It let Britain make a killing (literally and figuratively) on salt.

nicholas October 1, 2008 at 2:17 pm

You know, my roomates and I bought one of those 2 kilo bags of rice they have at Sams-Club back in the fall of 07, it seemed like a good investment being poor college students and all.

Throughout the last 12 months we really hadn’t cooked all that much of the rice and I thought out loud, “you know, I bet if we looked at ounce for ounce at a local supermarket retailer, we probably made a good 4 or 5 dollars on our sack of rice.”

Seriously, bread would have been a good bet too, alas, it doesn’t store very well…

Andrew October 1, 2008 at 2:39 pm

“Great Hedge of India”

Talk about a toll bridge moat! Now that’s a barrier to entry!

Diversity October 1, 2008 at 3:14 pm

Doesn’t GMU teach students to not pile into an investment at its peak?

dj superflat October 1, 2008 at 3:59 pm

and something to sharpen the stakes once the holy water runs out.

aaron October 1, 2008 at 5:33 pm

Jose, yes. And further increase default risk. However, fortunately the opposite is happening with oil, this will reduce production costs which should far outweight the the effect of increased buying in rice. Oil is the main cost of food production. This is what got us into the crisis (beyond being over leveraged and expect risk not to change).

With oil being up ~100% over the past several years, gas being up ~50%, etc., lot’s of other prices went up too. Incomes stayed the same or went lower for most people. Exenses/Income went up, increasing default risk greatly. Selling slowed, house prices went down, balloon rates that were never supposed to kick in kicked in…

aaron October 1, 2008 at 5:48 pm

If Oil and gas come down near their 2005 level, thing should mostly be hunkie-dorie. Except people won’t soon forget they can go back up, so I don’t think we’ll see big surges in consumption even if that happens.

Same thing with fuel efficency. Knowing that prices can go up is incentive enough to drive more fuel efficient technology. Unfortunately, people also won’t soon unlearn the inefficient behaviors they adopted during the price rises.

TD October 1, 2008 at 9:14 pm

Anyone remember “Gremlins 2″?

“Well, it’s rather brutal here. Right now we are advising all our clients to put everything they’ve got into canned goods and shotguns.” –Head Gremlin, aka Tony Randall

Cowcup October 2, 2008 at 7:22 am

OK. Let me be the first to sing a different tone here.

What was life like in 1913 Europe? or 1928 USA?

Wonderful! I like Jazz!

(That being said, I didn’t worry about the collider. Because death in the blink of eye doesn’t warrant any reaction.)

Of course we can argue 1928 is very different from 2008. The silliness is 1928 is also very different from 1913, or for that matter, from 1938.

Economics as a science is crap. It’s not a crystal ball as physics is in watching into atoms. Any optimism based on reason, at this stage, is crap.

I am optimistic because I don’t base it on reason. (I’m not trying to be sarcastic, in case you are wondering. Read some Hayek might help you.)

Jacob Lyles October 3, 2008 at 8:13 pm

At my old firm, we used to joke about opening a guns, liquor, and canned goods ETF.

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