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March 15, 2008

Monopoly Goes Live...with a Twist
by David Petch

Monopoly is one of the most popular board games ever created, which was first patented in 1935 by Charles Darrow. The object of the game is to accumulate as much of the property over the course of the game until everyone else is wiped out...there are more eloquent ways to define the rules, but the above definition is the blunt version.

The original game follows Austrian economics, where there is a limited amount of money, hotels (12) and houses (32). Having everything fixed keeps the prices of everything in check, but allows an advantage for one player to accumulate most of the houses and hotels. The original version of the game starts with each person receiving $1500.

Since the game has come off of patent and copyright protection, there are more versions of the game than one can count on their fingers and toes. The present economy functions under a fiat currency, so the starting amount of money in some of the newer versions is well above the original $1500/person.

There are a total of 10 different pieces, with the most notable being a wheelbarrow (hold this thought for the end of the article). Each person is represented by their game piece circling the board landing on property and picking them up, with the luck of the dice to try and get ahead of everyone else.

The US unknowingly has been playing this game for the past 50 years, and now the winner of the game is the FED, but the difference between the board game and live version is that the live version bank has unlimited funds. People in the 1940's enjoyed the post war economy making the US manufacturing center of the world. Prosperity was abound, people worked hard and saved, businesses reinvested money to grow their businesses. The old saying is that "It takes one generation to create wealth and two generations to blow it"...this basically defines what has happened. Two generations ago, our grandparents (parents if some are fortunate enough) worked hard and built a great country. Their children were born part way into the wealth and enjoyed the lifestyle that went with it, and saved somewhat but spent more than their parents to have what they worked hard for. The grand children (third generation) do not know the difference between saving and spending. This is the instant gratification generation that spends inheritance and money on nice clothing, cars and homes.

The instant gratification generation (which can be related to the "Homer Collective" in the editorial I wrote titled "Financial Taxidermy - Lessons in Being Stuffed") need things right away and borrowed money beyond belief in order to accumulate physical items that took their grandparents a lifetime to save. The wealth transfer through inheritance has been at work for the past 30 years, but will only accelerate over the next 5-10 years. Those who do receive an inheritance are likely to buy things, but the problem going forward is that most of the "old folks" have their money in savings because the Great Depression instilled in their minds to save for that "rainy day". The ravages of inflation are going to wipe out a lot of the savings that when come time for being distributed amongst surviving family members will be a lot less than it otherwise could have been worth.

The printing of money creates circulating bubbles and the most recent one to pop in the US was the housing market. Many of the second and third generations from the saving generation had most of their personal net worth tied up in real estate and as the housing bubble popped, so did their perceived wealth.

The houses and hotels that so many of the American populous (now applied to Spain, Great Britain, Australia and soon Canada) "thought" they owned have found out the banks own them. In the live version of Monopoly, the banker (US FED in this article) is the winner because many of the assets are being foreclosed. The US FED in the recent action of the past week has essentially monetized 200 billion dollars of bad mortgage debt by making it convertible into US treasuries. Bad loans from housing lost by banks is rewarded by being given 200 billion dollars, which in essence "could" represent 2 trillion dollars with the present fractional reserve system requiring only 10% of monies being kept under lock at any given time.

So, what happens to all of the people who lost their houses and hotels? They are no longer players in the game...instead they most likely are renting rooms in a hotel or house somewhere, trying to figure out what went wrong.

For any of the creative type who are thinking of a new version of Monopoly, what about the Wiermar version? The standard game comes with a 10 pieces, consisting of a battleship, sack of money, horse and rider, car, thimble, boot, Scottie dog, iron, top hat and a wheelbarrow. For the Wiermar version, I propose simply have all 10 pieces being different coloured wheelbarrows...because if global governments continue to print money, then this will be the outcome. The next article I come out with in a few weeks will delve more into the inflation acts of governments as they continue this "Live version of Monopoly...with a Twist".

A major portion of the work I do is technically oriented, but I am starting to write 2-3 editorials per week, such as the above. For further viewing of prior work, simply click on the Archive section of this site. I update the AMEX Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10-Year US Treasury Index, S&P 500 Index as well as commentary on market-related issues and new technical analysis findings. We follow some 60 stocks, with a focus on core positions and stocks that actually make up our personal portfolio. As well, the keeper of the site, Captain Hook writes 3-4 articles per week discussing macro issues, ratio analysis of various markets and an in-depth study of put/call ratios and shorting candidates.

Have a good day.

David Petch
TreasureChests.info

Treasure Chests is a market timing service specializing in value based position trading in the precious metals and equity markets, with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven to be very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested discovering more about how the strategies described above can enhance your wealth; please visit our web site at http://www.treasurechests.info.

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