Monday, December 20, 2010

Unintended Consequences

I personally don't believe the country will see hyperinflation. I see deflation. We have 53 trillion in total debt in the system both public and private. 100 trillion in unfunded liabilities which will be reduced drastically(Medicare/Social Security). There's actually over 600 trillion in derivative contracts in the system. Most derivatives are on the books of the international banks and brokerage houses. The derivative contracts need ripped up or a clearing house that has transparency needs to be created to reserve for losses. JP Morgan Chase has over 80 trillion in derivative contracts which is greater than the world's collective GDP estimated at 60 trillion. Anytime you have the supply of credit decreasing faster than the supply of money is growing, the net result is deflation.

Quote of The Day

Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.
— US Treasury Secretary Andrew Mellon to Hoover, 1931

Thursday, December 9, 2010

Saturday, December 4, 2010

Interesting Statistics

On August 15th 1971,President Richard Nixon closed the "gold window" which allowed foriegn holders of United States dollars to redeem their holdings for physical gold. If you look at any money supply chart from 1970 to the present the line is parabolic. I hate to be an alarmist because life will always moves forward one day at a time. I have to wonder if the United States dollar is a good store of value? The international investment community has been questioning the United States dollar as the world's reserve currency and they are taking action by moving out of this fiat currency.

Now to the interesting statistics. In the mid 1970's the top 1% of the population made 8% of the national income. In the mid 1980's the top 1% of the population made 15% of the national income. In the mid 1990's the top 1% of the population made 19% of the national income. In the mid 2000's the top 1% of the population made 23.5% of the national income which is more than the bottom 50%. If that statistic isn't alarming enough, the top one tenth of 1% earns 12 cents of every dollar earned. The United States of America was a great country when the wealth was distributed broadly and big corporations made their products domestically not in China. I hope this trend is reversed. The country needs tariffs on imports, plus balanced budgets, plus a dollar back by gold and other real commodities, plus taxes need to be kept low, this will equal a better standard of living for the masses.

Has the case been made to buy gold? The case for gold is made if you don't think the future will have the 3 P's. The experts say you shouldn't own gold during times of peace, prosperity, and price stability, you decide what you see today and in the future?

Friday, December 3, 2010

Niall Ferguson: U.S. Empire in Decline, on Collision Course with China

The U.S. is an empire in decline, according to Niall Ferguson, Harvard professor and author of The Ascent of Money.
"People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"

Given its massive deficits and overseas military adventures, America today is similar to the Spanish Empire in the 17th century and Britain's in the 20th, he says. "Excessive debt is usually a predictor of subsequent trouble."

Putting a finer point on it, Ferguson says America today is comparable to Britain circa 1900: a dominant empire underestimating the rise of a new power. In Britain's case back then it was Germany; in America's case today, it's China.

"When China's economy is equal in size to that of the U.S., which could come as early as means China becomes not only a major economic competitor - it's that already, it then becomes a diplomatic competitor and a military competitor," the history professor declares.

The most obvious sign of this is China's major naval construction program, featuring next generation submarines and up to three aircraft carriers, Ferguson says. "There's no other way of interpreting this than as a challenge to the hegemony of the U.S. in the Asia-Pacific region."

As to analysts like Stratfor's George Friedman, who downplay China's naval ambitions, Ferguson notes British experts - including Winston Churchill - were similarly complacent about Germany at the dawn of the 20th century.

"I'm not predicting World War III but we have to recognize...China is becoming more assertive, a rival not a partner," he says, adding that China's navy doesn't have to be as large as America's to pose a problem. "They don't have to have an equally large navy, just big enough to pose a strategic threat [and] cause trouble" for the U.S. Navy.

Thursday, December 2, 2010

It's Just That Simple Folks

We prop up this system of debt, taxation, and inflation. Eliminate the Federal Reserve and punch back against the financial terrorists we bank with. Move your funds to your local banks.