Author Bio

As the ends history unfold itself, where will humans be? Will we have gone out to claim and colonize other planets with peace among our fellow humans? Or, will we be wiped out because of our own reckless stupidity? The longer I’m alive, the more convinced I am that we will be the end to ourselves. A biology major studying nature would learn the complex and delicate balances of sustainable life on this planet. For us humans to grow and mature as an international society we all have to realize the mistakes we have made in history and to never repeat them again. We apparently suck at this. The current economic backdrop will show that we have failed miserably. Its great how Ben Bernanke is our current FED chairman since he is the expert on the Great Depression. Its not so great that Alan Greenspan Fed Funds Rate (FFR) from 6.5% to 1.0% during 2001-2003 and allowed credit to flow freely. So banks lent away, and consumers borrowed and spent away on new homes. Now we all get to see the wave of idiocy (from money strapped citizens who like to buy houses they can’t afford to the former Fed Reserve Chairman) crash and destroy us all.  Bernanke has tried the best he can in trying to prevent this all from happening, but its not in his hands at this point.  Although Bernanke has tried to make plenty of money available to banks for lending, they cannot force them to. The banks don’t want to lend money they think they’ll lose. Individuals feel the squeeze and are cutting credit and so businesses get backhanded twice from consumers not spending with their credit cards or their cash.

Our biggest threat: Deflation

Deflation could be described as falling prices across the board.  Inflation is zero. Stores and services are selling everything cheaper to attract customers, customers want to hold their money, banks aren’t lending despite the amount of dough the government gave them to sit on, pretty soon those customers are losing their own jobs since no one is buying from their company. The jobless rate is 8.5% the highest in 25 years.  Check out the heat map from Slate to see it how much trouble we’re in http://www.slate.com/id/2216238/ Deflationary spiral, here we come.

How could we ever fix this?  When the Great Depression occurred, we got out primarily because of WWII;  the New Deal was a bit of a temporary bandaid for us. But what was added to legislation to prevent it from ever happening again? The FDIC,  and the Glass-Steagall act. With the passing of time, regulations to prevent capital markets from becoming violent were unravelled. Glass-Steagall was repealled in 1999.  I guess one real way of getting banks to lend is to stuff them with money, let them to bid up the prices for the empty houses they are holding, and hope that not marking to market makes a real difference. Guess what? Not everyone is a fool. This accounting method is basically illusionary. If you’re not selling something at the price others are willing to pay for it then why are you selling anything? Banks are just gonna buy between themselves to make it seem like the houses are worth much more than they really are. What happens when real demand picks up again but the prices are still set artificially high relative to real demand?

Our next threat: Hyper-inflation

What happens when everything actually gets better?  At first everything will seem fine and dandy if Obama can effectively add the jobs we lost and re-regulate the financial system. The banks all start lending again and consumers start spending again. But what happens when the velocity of money goes from 0-100? The FED better contract monetary supply when it sees this coming or I’m 100% sure we’re all doomed by stupidity.

Internationally:
If the US is going down the drain, so is the world. A very real possibility is the use of SDRs (Special Drawing Rights) from the IMF as an international currency. This unlikely now but much more likely if the whole world goes through an international depression. It will if the US does so, and I’m just waiting, hoping, praying that it doesn’t happen because forex trading won’t be what it is now.

======

Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

Well, there was a point in time in the past when I trained in martial arts and sparring. This training allowed me to see in its raw form, human actions, emotions and reactions. When you’re in the ring with someone, everything else disappears ; and minor distractions cease to be an issue. You are in absolute focus. Your state of mind and psychology are essential in battle. Without that training, when you spar, you act in what you think is your best interest. You move, block, and strike in a whichever way makes your body feel naturally comfortable in movement. However, for someone who is a seasoned veteran, your openings and weaknesses are exposed. Your perceived best interest is proved a painful mistake. Because of your lack of training, you lack discipline in action, and subsequently, expose yourself to critical blows from your opponent. Forex trading psychology and risk management is crucial. If your overall expected direction is correct in the long run but you do not know when to enter and how to protect yourself with stops, you will lose money. If you don’t know how to take the pain even if you end up being correct in a longer term period, you still go stopped out, you still loss pips and money. But remember, pain and losing is never an end in itself unless you let it be. In the ring, after sparring with multiple opponents over time you learn why your supposed to block , strike, and move a certain way instead of how you normally feel like you should. You gain muscle memory and you react without double guessing yourself. There are emotionally caused slight responses from your opponent that clue you in on their next move. It is the information that diffuses through their actions that interests you. Thus, you learn from your mistakes and take advantage of holes in your opponent’s defense. You become disciplined; you become a good fighter.