I am really flabbergasted by the amount of nonsenses that is spread in our media circus about the causes of our current economic and financial troubles! Our so-called experts continue to spew their ignorance about basic economics and common sense logic to the point where I, despite my obvious skepticism with regard to their knowledge, ends up as confused as most people. Yet, I am willing to fight that virus, the virus of misinformation and mis-education and misunderstanding. To get to the point, our problems are quite simple and easy to understand and to fix. Our problem is our monetary system and the establishment that has abrogated itself with the " right" to issue it!
Money is a medium of exchange, a standard of value and a mean of economic calculation. It arises " naturally" by the choosing of the different individual entities that are engaged in the process of exchange. Individuals in a society consequently vote for their best tool of economic exchange, not the State or a bureaucratic elite. Money is simply a commodity, a good that has been chosen through a simple process of natural selection as the better mean of exchange for other goods and services within a confined society. Historically, money has varied from wheat in ancient egypt, to iron bars in western africa, and tobacco in the early colonial Americas. But, throughout our 5000 years history, Gold and Silver have won out as the best and most efficient monies! Consequently, despite their various application in metallurgy, healthcare and dentistry and even new technologies, Gold and silver are primarily " MONIES", the best and most efficient monies! It this consequently beyond shocking when the so-called academic call deride gold as a relic! The sky might as well fall on our head for such " intellectual nonsenses"!
The problems we are witnessing across the globe are simply due to the abandonment of the historic natural monies and the abusive consequences of government monopolies of monetary policies through the measure of monetary inflation that are used by the state to services the needs of the government and financial and corporate plutocrats above those of other market participants.
Simply put, the government and its connected agency have " stolen" away from the general population its tool of independence for it is impossible to have a just and equal society with a corrupted monetary system that serve a few people while destroying the purchasing power of the general population.
Real money is gold, no matter what the government say, no matter the amount of gibberish that is pushed in and out by the corrupted academic establishment that has an entrenched interest in maintaining the status quo. Sound money is freedom, sound money creates wealth and it is by no accident that the Nations that have a relatively " hard monetary" history are also the most dynamic and wealthy society in the world today.
From a trading and investment perspective, due to the current monetary distortion aimed at saving the systematically bankrupted financial monsters like Bank of America, Barclay, a currency and commodity trader should understand the important paradigm of real value. Our values have been distorted by the corrupte financial and economic establishment:
The institutions that should be subservient to the needs of people are now controlling the policies and it is by no accident that poverty and misery is spreading among the once wealthiest and most productive parts of the world while a connected group of bankers and speculators are benefiting. This imbalance must be stopped and its parasitic element discarded with. We have reached a tipping point, a point of non return where paper fiat money will eventually be destroyed and all the pseudo-collectivist monetary union will end up in flames. Gold and silver are the eternal monies and the only incorruptible medium of exchanges.
Buy Gold and silver, always!
Thursday, June 2, 2011
Wednesday, May 25, 2011
The Lehman Bros plan!
People often ask me, "What do you think the government should do instead of QE inflation?" My stock answer is that the government should not try to fight the depression with government spending and cheap credit. Trying to stop the market from correcting the errors of the past only delays the consequences and makes them much worse.
Government should balance its budget. There should be no new credit expansion by the Federal Reserve. Most importantly, government should not meddle in markets to try to soften the consequences of the correction. Specifically, that means no bailouts, stimulus packages, or new public-works projects. Do not prop up wages. Allow competition to lower the prices of land, labor, and capital. The only positive steps for government to take are implementing tax cuts and spending cuts, eliminating regulations, and allowing free trade.
Now, I have a name for this policy. It's called the "Lehman Bros. plan," after Lehman Brothers, the large financial firm on Wall Street that was allowed to go bankrupt in September 2008. This plan relies on allowing big firms to fail. Had this policy been followed from the beginning, I have little doubt that the crisis would already be over and we would not have added to the debt problem.
Henry Lehman got started in business in 1844 with a dry-goods store in Montgomery, Alabama. After his two brothers joined him a few years later, they named the business Lehman Brothers. They accepted raw cotton in exchange for their goods. This increased the volume of their business because people had more cotton than money, and it increased their profit margin because they made money selling the goods, and then they made more money selling the cotton. They later opened an office in New York and helped start the New York Cotton Exchange in 1870. Later, they joined the New York Stock Exchange and helped take companies such as Sears, Macy's, B.F. Goodrich, Woolworth's, and Studebaker public by selling their initial public stock offering. It was a great American success story from Dixie.
Monday, May 23, 2011
Zimbabwe to the Dollar: Who is laughing now?
The central bank says the country must consider adopting a gold-backed Zimbabwean dollar, warning that the US greenback's days as the world's reserve currency are numbered.
The government ditched the Zimbabwe dollar in 2009 after it had been rendered worthless by record inflation levels, and adopted multiple foreign currencies with the US dollar, the South African rand, and the Botswana pula being the most widely used.
Finance minister Tendai Biti says the country needs at least six months of import cover and a sustainable track record of economic growth, inflation, stability and above 60-percent capacity utilisation in industry before the Zim dollar can be brought back into circulation.
However, central bank chief Dr Gideon Gono said the country should consider adopting a gold-backed currency.
Thursday, May 19, 2011
The Fed is all talk and no deeds!
The Federal Reserve said last month that the economy is gradually improving and began discussing how it would reverse policies adopted during the recession that pumped billions of dollars into the economy.
Some members said the Fed might need to start boosting interest rates this year to guard against inflation. Any effort to tighten credit would lead to higher rates on some mortgages, credit cards and other consumer loans.
Fed policymakers didn't commit to taking any action at the April 26-27 meeting, according to minutes released Wednesday. But they agreed that if the economy continued its steady growth, the Fed would need to pull back on its massive stimulus programs and take steps to prevent consumer prices from getting out of control.
The officials generally agreed that the first step should be for the central bank to stop reinvesting money earned off its holdings of mortgages and Treasury securities. That's consistent with comments made by Federal Reserve Chairman Ben Bernanke at a news conference after the April 27 meeting. But that would have only a limited impact on the rates Americans pay on loans.
The Fed is playing a psychological game with the markets by trying to manipulate investors sentiments into dumping commodities in order to reduce the effects of its monetary inflation that have led to higher prices across the board ever since it began to engage in quantitative easing policies. Ben Bernanke is an archi-Keynesian who believes that increasing liquidity to stem the effect of deflation is the way to go. He and many economists surrounding him believe that the great depression was caused by the then cautious federal reserve and, he intend not to repeat the same mistake of his predecessors. We conjecture however that such an understanding is utterly flawed because what the economy actually needs is a clearing mechanism that allows bad debts to be liquidated in order for the economy to be reset on a much sounder footing. The Fed and the government have to reduce spending and allow the zombies banks to actually go bankrupt thus clearing the field for a newer generation of cautious entrepreneur and investors. Ben bernanke recipe will eventually lead us to disaster by destroying the value of the dollar and spreading misery and poverty across the US and the entire world. Consequently, depending on how investor greet the Fed tightening rumors, we think that the market might eventually fall drastically around June; but, right around the fall, the Fed will eventually come up with a new plan to save the economy by engaging in another set quantitative easing policy. There is no way the the people at fed are ready to engage in a long term across the board tightening and deleveraging. The investor must therefore be careful not to fall for the what is nothing but a con game by the fed to knock down price inflation across the board for the short term.
Tuesday, May 17, 2011
Tuesday, April 19, 2011
Sunday, April 17, 2011
Micheal Burry: The last voice of reason!
Micheal Burry, in my humble opinion, is simply one of the rarest and brightest mind in America's finance for his understanding of the insanities permeating our current financial and economic paradigm and for profiting from it.
Thursday, April 14, 2011
Is Gold in a bubble?
Gary North has an answer for ya!
If you did what Bill Bonner and I have been recommending for a decade, you own gold. Bonner began promoting the purchase of gold in the year 2000. I strongly promoted this for my subscribers after September 11, 2001, when the Federal Reserve began pumping up the monetary base in earnest. Neither of us has ever stopped recommending holding money in gold.
I have stressed holding coins, especially tenth-ounce American gold eagles.
I am writing this for those who did what I recommended, have quadrupled their money (on paper and in digits), but who may be getting cold feet.
There are good reasons for buying gold. But you should have an exit strategy in mind.
We are told by the mainstream financial media, which never told investors to buy gold over the last decade, that gold is in the final phase of a bubble market. But how can any market be a bubble market when the mainstream financial media are not running report after report on the bubble, telling readers and viewers about how much money people are making.
What mainstream financial outlet warned investors loud and clear, issue after issue, in 1999 that the dot.com market was a bubble? I told my subscribers in February and March of 2000 that it was, and that they should get out. But I published a newsletter. I was not mainstream.
What major outlet warned people in 2006-2007 that the real estate market was a bubble, that wise investors were getting out? I did in November 2005.
Bubbles always continue for months or even years after old timers say they will pop. Old timers have trouble estimating the fear of the buyers at being left out and the fear of lenders at being left out. The two sides — debtors and lenders — keep the dance of doom going much longer than old timers can imagine possible. But eventually the dance ends.
I spoke at Lew Rockwell’s conference. One of the speakers is a banker. He lives in Las Vegas. He was taught by Austrian School economist Murray Rothbard. He earned a masters degree in economics. Then he went into banking.
As an Austrian School economist, he understands the business cycle. He understands that the Federal Reserve system has pumped money into the economy, creating a housing bubble since 1996. He knows this boom will bust.
He has no illusions about this housing market. Compared to him, I have been Pollyanna. He spoke of the mental outlook of the builders in Las Vegas. They all know it can’t go on, but they are determined to party until it does. “Then they will declare bankruptcy and start over,” he said. This is their exit strategy.
He was correct. It happened. He lost his job as a Las Vegas banker. He is now the president at the Mises Institute.
I went on to write the following:
I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan’s counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven.
Full story with Gary North
"Senate panel slams Goldman!" What about JAIL?
This article is a classic " tell me something I didn't know already" story. Of course everybody knows that Goldman and the other Wall Street thugs have profited from the boom and bust side of the last real Estate mania. The real issue heretofore is if any of these charge carried against the " big guns" on wall street would lead to potential criminal pursuits, heavy fines and potential liquidation. These are the same parasitic institution that made tons of money during the boom years but also managed to get free loans money from the Fed in the aftermath of the crisis. It is clear to all that these institutions are holding the US economy hostage and that's why we can can wonder if ANYONE AT GOLDMAN WILL BE LOCKED UP!
Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, one of Capitol Hill's most feared panels, has a history with Goldman Sachs.
He clashed publicly with its Chief Executive Lloyd Blankfein a year ago at a hearing on the crisis.
The Democratic lawmaker again tore into Goldman at a press briefing on his panel's 639-page report, which is based on a review of tens of millions of documents over two years.
Levin accused Goldman of profiting at clients' expense as the mortgage market crashed in 2007. "In my judgment, Goldman clearly misled their clients and they misled Congress," he said, reading glasses perched as ever on the tip of his nose.
A Goldman Sachs spokesman said, "While we disagree with many of the conclusions of the report, we take seriously the issues explored by the subcommittee."
The panel's report is harder hitting than one issued in January by the government-appointed Financial Crisis Inquiry Commission, which "didn't report anything of significance," Republican Senator Tom Coburn said at the briefing.
More than two years since the crisis peaked, denunciations of Wall Street misconduct are less often heard on Capitol Hill, with lawmakers focused on fiscal issues. But Coburn joined Levin at Wednesday's bipartisan briefing, firing his own sharp attacks on the financial industry.
"Blame for this mess lies everywhere -- from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight," said Coburn, the subcommittee's top Republican.
"It shows without a doubt the lack of ethics in some of our financial institutions who embraced known conflicts of interest to accomplish wealth for themselves, not caring about the outcome for their customers," he said.
The Levin-Coburn report criticized not only Goldman, but Deutsche Bank, the former Washington Mutual Bank, the U.S. Office of Thrift Supervision and credit rating agencies Moody's and Standard & Poor's.
"We will be referring this matter to the Justice Department and to the SEC," Levin said at the briefing, though he did not elaborate. A spokesman later said, "The subcommittee does not intend to reveal the specifics of any referral."
The report offered 19 recommendations for reform going beyond changes already enacted after the crisis in 2010's Dodd-Frank Wall Street and banking regulation overhaul.
Case studies from the go-go years of the real estate bubble formed the bulk of the report, which said a runaway mortgage securitization machine churned out abusive loans, toxic securities, and big fees for lenders and Wall Street.
It cited internal emails by Wall Street executives that described mortgage-backed securities underlying many collateralized debt obligations, or CDOs, as "crap" and "pigs."
Continue reading at reuters
BRIC dumping the dollar?
The BRICS group of emerging-market powers kept up the pressure on Thursday for a revamped global monetary system that relies less on the dollar and for a louder voice in international financial institutions.
The leaders of Brazil, Russia, India, China and South Africa also called for stronger regulation of commodity derivatives to dampen excessive volatility in food and energy prices, which they said posed new risks for the recovery of the world economy.
Meeting on the southern Chinese island of Hainan, they said the recent financial crisis had exposed the inadequacies of the current monetary order, which has the dollar as its linchpin.
What was needed, they said in a statement, was "a broad-based international reserve currency system providing stability and certainty" -- thinly veiled criticism of what the BRICS see as Washington's neglect of its global monetary responsibilities.
The BRICS are worried that America's large trade and budget deficits will eventually debase the dollar. They also begrudge the financial and political privileges that come with being the leading reserve currency.
"The world economy is undergoing profound and complex changes," Chinese President Hu Jintao said. "The era demands that the BRICS countries strengthen dialogue and cooperation."
In another dig at the dollar, the development banks of the five BRICS nations agreed to establish mutual credit lines denominated in their local currencies, not the U.S. currency.
The head of China Development Bank (CDB), Chen Yuan, said he was prepared to lend up to 10 billion yuan to fellow BRICS, and his Russian counterpart said he was looking to borrow the yuan equivalent of at least $500 million via CDB.
Continue reading at Reuters.
Wednesday, April 13, 2011
Is the US housing market making a comeback?
The always prescient Bill Bonner ask!
Buenos Aires is beautiful. We have been blessed with good weather.
The city is booming, too. Strong agricultural prices have done what they always do in Argentina – they’ve set off a boom.
“Property prices are up about 30% over the last 3 years,” says our BA-based colleague, Rob Marstrand. “But this is such a funny place. I love living here, because you see everything. If not in the present, certainly in the past…or the future. Booms, busts, corruption, inflation – everything.
“Only about 6% of properties are sold with mortgages. So this is a real boom – where people are paying cash. But, where does this cash come from? Much of it comes from the bull market in farm products. Argentina is one of the world’s top producers of cereals, for example. But there is probably a lot of money coming from the government too. The inflation rate is about 25%.
“Now, you’d think that a country with a 25% inflation rate would have a currency that is falling through the floorboards. But no. The authorities have been supporting the peso; it actually went up 4% against the dollar. Put the dollar’s drop and Argentine inflation together, and you get a loss of dollar purchasing power of 30%.
“People want to protect themselves. And here, they do it by buying real estate.
“Americans might want to think about it too.”
Prices are down 30% nationwide in the US. In Florida, Nevada, and most of California, they’re half off. Even if they might go down a bit more, there are some very good deals available now. A friend of ours is able to buy apartment buildings for little more than 5 times rent income. If upkeep and taxes take half of that, that still gives him a 10% return. But it could be much better. Suppose he takes out a 30-year, fixed rate mortgage. Now, suppose inflation goes up. Every percentage point that consumer prices rise is another percentage point of yield for a fully-mortgaged investor.
Rob also is in charge of our Family Office investments.
“I don’t see any way that they can unwind all this debt and spending without causing even more problems,” he says. Investors might get some protection from real estate or stocks. But the best protection is gold.
Continue reading at here
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