Comment from Hugh Ching, Post Science Institute

Abstract Low-rate-of-return projects did not work during the Great Depression. Society should invest in high-return project during high unemployment. However, the rate of return on a project can only be calculated from a solution of value. To predict, prevent, and cure future crises, we need the solution of value to prevent over- valuation. (An Official Statement From Post-Science Institute) Subject: Knowledge For Current Financial Crisis: Valuation Society can progress only through the advancement of knowledge. The knowledge advancement for the current financial crisis should be valuation, which can predict, cure, and, most important, prevent future financial crises. Valuation is at the heart of the current financial crisis. We need correct valuation for pricing the troubled assets, which are stopping banks from lending. Funding priorities in the stimulus package should be based on the rate of return on investment, which can only be determined from correct valuation (www.regulations.gov 4810-25-P). Almost all the real estate appraisal authorities backed our mathematically rigorous solution of value (Patent No. 6,078,901) to solve the S&L Crisis and, more importantly, willing to discard their traditional appraisal method based on the three approaches to appraisal, namely, the market, the income, and the cost approaches. The solution of value had predicted publicly since 1984 the S&L Crisis, after a local appraiser called our office, and it warned the Federal Reserve in June 2006 of the Subprime Woe, just two week before it first flared up. Even if by some random chance we have the current crisis under control, future financial crises will grow bigger and even more fierce. Valuation is the foundation of economics. Useful economics cannot start before the correct solution of value. For the past century, economists have tried to technically solve the problem of value. Mathematicians, such as John von Neuman and Gerard Debreu, help to rigorously define the problem of value. Debreu even produced a qualitative solution for the spatial part of the problem of value, but did the temporal part incorrectly. Other temporal solutions, such as the Black and Schole Model, have just realized that the crux of the problem is in solving the resale price, upon which the price depends. But, the real estate appraisers have known for over 70 years that the key problem of valuation is in determining the resale price. The correct solution of value simply solve the resale price as it solves for the price; the price and all the resale prices to infinity in time satisfies mathematically the same cash flow equation for realistic accounting. Economists need practical experience in formulating the problem of value and mathematical rigor in obtaining an infallible solution. Being mathematically rigorous, the solution of value is a non-violable law of nature in social science, as gravitation is a non-violable law of nature in science. Nature teaches us through punishment by financial crises to learn its non-violable laws of nature, such as the solution of value. In general, the progress of society should be based on knowledge, not just money or politics. In practice, the Federal Reserve can try several commercially available methods of valuation to, once and for all, answer the question: "Except this proposed solution of value, are there other correct solutions of value which can predict and solve financial crises?" Thank you for your consideration. ### Hugh Ching, Post-Science Institute 2/4/2009