In light of the monster $500 million dollar investment in Facebook by bailout cheerleader Goldman Sachs I figured I would say a few words on today’s $50 Billion dollar valuation of Facebook.

Short and sweet, how could anyone trust the valuation and pricing mechanism of a bank that was bailed out by the government? This is the same bank that tanked their previous investments through the acquisition and sale of toxic investments no more than two years ago! The only reason this investment bank even stayed afloat through the attempted market correction is because nanny government stepped in to save the day with billions of inflation dollars.

Beyond that, the country’s top banking executives all know one thing, they need a new boom to counteract the market bust created by the Fed. They are sadly mistaken though. The right thing to do would be let the economy crash! Bring forth an all correcting depression – level the market so a true market can begin to flourish. We all know that won’t happen though. Anyone who studies Austrian Business Cycle will no doubt be able to predict what’s next.

These banksters strive for credit increase and newly printed currency. How do they accomplish this? They help create a bubble. A bubble is a boom. A boom is brought on by increased credit and inflation through the central bank. How do banksters manipulate this? Easy, predetermined stock prices, incease in the price of capital goods, and hype. Valuing Facebook at $50 billion is a great start. With the onset of things like Quantitative Easing 2 and aftermath of the ‘08 bailouts there is a plethora of new credit out there. Now the banks can begin to exploit it – all with government help of course.

In his essay “Does Austrian Business Cycle Theory Help Explain the Dot-Com Boom” Gene Callahan writes:

We believe the events comprising the dot-com boom and bust can be illuminated by tracing the Cantillon effects as new money made its way from the Federal Reserve, through the banking system, and finally to the dot-com start-ups. This liquidity led them to bid up the price of capital goods that were complementary to their business plans. As those prices rose, it became clear that many of their plans were not feasible. Broad-based price indices, such as the CPI and the PPI, mask such important phenomena as the steeply rising prices for web programmers, Silicon Valley real estate, and Internet domain names— precisely the effects predicted and explained by ABCT.

With the onset of massive inflationary practice in the recent years the time is right for these banksters to start the process all over again. Dot-com-boom-2 is beginning to loom. Facebook can now lead the way. Investors will pour in to get ahold of this hot stock ready to pop. And yes, it is coming.

From The New York Times:

On Sunday night, a number of Goldman clients received an email from their Goldman broker, offering them the opportunity to invest in an unnamed “private company that is considering a transaction to raise additional capital.” Another person briefed on the deal said that Goldman clients would have to pony up a minimum of $2 million to invest and would be prohibited from selling their shares until 2013.

Boom, boom, boom. This will coax more investors (who may or may not miss out) to scramble and get ahold of the next hot .com to file for an IPO. Some even being pushed to file. The prices of each company will begin to rise, start-ups will begin to be valued before they even offer anything of value. And what will become of property value in the land of tech? What about programming jobs, and domain names? Prices will now rise… again. Another boom in the constant boom-bust cycle will take shape. This is the mid to late 90’s all over.

What is overlooked, at least in my mind is the fact that other than advertising Facebook doesn’t really produce anything. Is that incorrect? Should a glorified marketing agency be valued so high? They don’t contribute to supply so how can there be a true value? A company like Apple which was valued around $300 billion is a reason to see through the smoke and mirrors. Can anyone see the difference between the two? Apple produces some of the hottest tech toys in the world (supply). They fly off shelves everyday. People wait in line for days to hold new iPods, iPhones, and iPads in their hands! That is a company worth investing with, not a company that is more or less a communication trend. Hi MySpace!

Facebook is riddled with privacy concerns and in my opinion is nothing more than a trend. There are hundreds if not thousands of other potential “Facebooks” out there. All that would need to happen is a switch in preference. Human action. In this event the ride would be over. It is natural, people change, technology innovates, and most importantly tastes change. What the hype is now will not be the hype tomorrow.

In the age where things change in an instant Facebook’s valuation is as subjective as it gets. It is nothing more than a tool to open up the casket of a time when money was flowing from the Fed pipelines. If you jump on the bandwagon (do you have $2 million dollars?) good for you. I hope you see a nice return but don’t cry to me when that return can’t buy you much more than a sandwich and a soda. And remember you can’t buy houses with friend requests.