Monday, October 29, 2012

Global Danger: 1st Assets, Now Gambling...L&C

I do not promote the idea of the global economy, however I do believe in international trade. Conflict? No! If you cannot produce certain things, lack the resources, wrong climate, ability, whatever, then trading for what you have for what you need is obvious. The problem of free trade or global trading is the manipulation factor and the negative traits of our human character.

When the US was on the gold standard, fiat trading partners not only used local protectionism, but currency manipulation as well as state financed corporations to fleece gold for paper. How can you justify paper for gold? You can't. We never should have allowed fiat dollars for gold backed dollars, but legal issues aside, the "free traders" ruled the day. Nixon ended the game in 1971 and a new game began.

This new action allowed the player with the most chips to buy assets of desire. The Japanese were on top in those days and soon they bought Rockefeller Center, Columbia Pictures and more. The fiat staked cards moved around the table. In the 1980s the US had the most chips and our oil companies soon embarked on world assets along with Coca Cola, PG and others. To the dismay of central bankers the game would stall from time-to-time due to debt that never gets paid off, but rolls-over into a larger bundle of debt and doubts begin to arise. These doubts usually end in currency devaluations to gain chips irregardless of the pain paid by non-playing citizens of the countries of the central banks. This is the negative trait in our human nature. We can justify it in many ways like jobs, economic well-being, growth or standard of living. Bottom line: it is me first, selfish greed and this aspect of greed is wrong and that is why I'm generally against global trading. Within the nations that feel the ill effects of global trading negative outbursts will eventually come to surface. Why does gas cost so much? It is those greedy Arabs. Maybe, just maybe, the OPEC members raised the price of oil because the dollar lost value due to currency manipulation, but the truth gets lost today because like the present Presidential debates, there is no truth.

The fiat asset game today is like Halloween. It is in disguise. The following brand name companies use to be American and most people still believe that they are, but alas, they are not.
Thirsty? Have a Bud. Stomach ache? Alka Seltzer. Insurance? John Hancock. Traveling? Holiday Inn. Desert? Good Humor. More ice-cream? Put it in the Frigidaire. Need a tire? Firestone. Baby food? You can get some Gerber at the 7/11.

The above is all from the action of the chips, but what happens when tolls rise on roads for profits which is also happening? What happens when utilities get turned off? See my point. People may or may not know the true cause of their situation, but mobs are not rational. The sins of manipulation are laying serious harm  for future social unrest, especially from the dangers that I see in the present stage of the global economy. The next crisis is a seed in the on...

With central bankers lowering interest rates to allow governments the ability to repay their debts, the yield for savers is non-existent. In the search to seek higher yields and with the shrinking number of quality assets to purchase with their chips, investors are turning again to synthetic collateralized debt obligations backed by derivatives bets on the creditworthiness of borrowers. They are betting on bets.
Just recently, Blue Mountain Capital Management LLC jumped into the market for $750 million, but ended up with $1.5 billion. Who gave the money? Pension funds from the US, Canada, Europe and Japan. The same folks who lost big in the sub-prime collateralized debt obligations in 2008. Who says history does not repeat? There are many more examples like the one that I just used and all these bets are multiplied on the negative aspect of our human nature. This will not end well.
Liars and Crooks:QE3 will help create jobs and lower unemployment. End the Fed!