JP Morgan, Morgan Stanley, heck, all of Wall Street have a new game to get their newest yacht. They are targeting high-end net worth individuals. They are offering them paperless loans and then, they are bundling these loans into security swaps. Sound familiar? That's right! They are substituting housing for securities, bonds or both in this new scheme. This easy loan is made because Wall St. already has the security, bonds or other assets in house. No paperwork. Take the money! Let's both go down to the boat dealer and buy a yacht. The market? Don't worry, it always goes up.
Don't Cry For Me, Rich Man!
Yeah, the Argentine revival show will end up crying on the ears of lobbyists and then, Congress. The spin will go something like this, "Something must be done for our rich folks who provide for so many with low paying jobs like cleaning, driving and baby sitting."
What about
Dodd-Frank?
It never was in reality. Just like the "deal" yesterday in Congress, it gets weaker and weaker to the point that it never was more than an abstract thought to placate the masses. So, subprime is back in business behind the scenes until it isn't. At that moment it will be a problem. As for you wealthy out there, get it while you can. You know the Fed has your back. So, step up to
Private Client Banking
a separate section in banks just for you. In a hurry? Then, apply for Morgan Stanley's,
Express Credit Line.
If the above was all the bad news you could take, close the site, come back to it after a break. The other problem has already showed itself and it is a doozy.
OIL
The price of the commodity as you all know whether you drive or just sit in the car, has been coming down. How low is it? It is so low that the Bird of Paradise was seen in a jacket because it was that cold. It is down by 40% this year! Before I get into the ramifications of low oil to the economy, it is important to realize that other commodities like iron ore, materials, gold and silver are all down too. Iron ore is at a five year low and JP Morgan now says, it could fall to $67. a tonne in 2015. You and me don't follow things like this, but we can understand the implications. In January JP Morgan said
the price would be $87. a tonne. Dr. Copper is below $3. a tonne and this is a dollar below forecast. These deflationary prices reflect a slowing global economy and keep this in mind. In late 2007 oil began to fall and it predicted the crisis of 2008. There are other signs too.
Japan
is in recession and it is deeper than previously thought. Half the members of the EU are in recession and the other half is gaining on the losers. China's demand for materials is falling. Russia's ruble is down 40% which will cause pain to its citizens and its central bank indicated a recession in 2015. Brazil and other emerging nations have internal problems with strikes and national protests, not to mention our own Ferguson, "Don't shoot!" story. Finally, the Baltic Shipping Index is down 500 points since last month. Global transactions are falling off the cliff.
Back To Oil
Do you know what "capital expenditure" means? It is money that companies plan to spend in an up coming year to increase quantity, get new equipment or put on a new roof. Since I'm referring to oil, all my example center on oil.
The oil giant, Conoco-Phillips started the process with low oil prices by cutting back its capital expenditure program for 2015. They cut 20%. Others will follow and it is already showing in oil drill permits which were down 40% in November. Keep this in perspective: The oil industry supports 9.3 million people with high paying jobs. It adds $1.9T to the GDP each year. Since 2007, 1.36 million jobs were gained in oil states, whereas 420,000 jobs were lost in non-oil states. In addition, oil accounts for 20% of junk bonds to fund their business. At present junk bonds are falling rapidly as investors are selling. They see this problem on the horizon. Too much supply not enough demand.
Corporate Debt
Now, all these junk bonds for smaller fracking companies like Continental Resources are putting these loans in jeopardy. Continental only had a debt balance of $140 million in 2005, however they expanded quickly. They now owe $6T in debt with lower prices for their product which is 43x the debt level of 2005. The oil industry has $200B in high yield debt and another $300B in loans. If one fails, it will effect a lender who should have the loan tied to an insurance derivative to which will effect more than one insurer and more than one loan. We've all seen a domino falling commercial except this will be real life. Why, you ask? Because Morgan Stanley now sees oil at $43. a barrel for 2015. This is less than half its previous estimate. At that price level more than half of the energy companies will lose money on every barrel sold. The "Don't Cry For Me..." song will be played many times in 2015. I have warned you, dear reader before about the dangers of derivatives. This could trigger the event.
P.S.: Argentina is in serious trouble with its currency too, but the lobbyists will sing to Congress while the Fed's, Yellin will perform for the media. Hopefully, a new song with the meme of "End the Fed" will resound throughout the land.
Thursday, December 11, 2014
Thursday, December 4, 2014
Market Alert: Buy Gold Now
It is rare that I post a buy or sell recommendation, however many indicators point to a near-term buy in gold or silver. Hey, you can cover your Christmas presents. This is a short window of opportunity. Gold will hit resistance at $1229. It is now around $1215. This signal came from the Swiss referendum that failed. Gold sank to $1240 area, but a strong rebound put it back over the $1200. level with volume on contracts. Dear reader, I'm a believer in volume. If you see a sale and the store is bursting at the seams, maybe you should investigate. If on the other hand, you see a sale and no one is buying, maybe there is a reason. Investigate the reason. This is what I did.
Indicators
From the technical viewpoint as stated the buying in gold had a strong resolution. This is very good. Gold itself has resistance, and generally, the first attempt at resistance fails. This is the time to accumulate shares in companies like Gold Corp or a gold miner index. I brought shares in Silver Wheaton. Place a stop to protect profits or limit losses. If gold breaks through resistance, the next point is $1325- $1350 area. You could make nice buck or two.
The above is from charts. The following is from fundamental aspects with a lot of "ifs" and "maybes."
The recent decline in oil has many side effects. You see there are many shale oil companies. These are smaller entities that cannot secure funding from standard institutions. They get their drill money from junk bonds. They pay more interest and now, the value of their product is putting a squeeze on them. The total junk bond exposure is 20% of the market for these oil loans. Maybe someone is in trouble?
The ECU had discussed QE aspects. Now, they have put this discussion off until 2015. Maybe someone like Germany opposes the idea.
The Japanese yen is at 119 and heading for 120 as predicted in an earlier blog. The continuation of currency wars with the declining value of fiat money only allows the shine in gold to show forth.
Russia has started a verbal war with the West and another internal war with its own central bank. One leading politician called their central bank, "An enemy of the people!" The ruble has lost 40% of its value and a chain reaction to bonds is causing under the surface problems. Maybe something bad will be exposed?
In the US the Fed has stopped their QE program. They said that they will soon raise interest rates, however they keep changing the guidelines for the day that this will occur. They will have to put up or shut up. Maybe they will lose face as they say in Japan?
In China they have reduced interest rates after the slowdown to their economy. Funny, the reported GDP is always over 7%,and yet, we know those figures are fake. China has a building bubble and maybe something is popping?
India had a change of heart about gold. They ended their restrictions on it. This will cause more buying in gold.
Finally, the leasing rate for gold has fallen so low that it is being offered at give away levels. Many banks and companies use this as an asset to bolster their account balances. This rarely happens. When it occurs, a rally in gold follows.
If these and other aspects continue, gold will benefit. This could be the push that gets gold back to $1350 and a nice Christmas present to you. Peace and good luck!
Indicators
From the technical viewpoint as stated the buying in gold had a strong resolution. This is very good. Gold itself has resistance, and generally, the first attempt at resistance fails. This is the time to accumulate shares in companies like Gold Corp or a gold miner index. I brought shares in Silver Wheaton. Place a stop to protect profits or limit losses. If gold breaks through resistance, the next point is $1325- $1350 area. You could make nice buck or two.
The above is from charts. The following is from fundamental aspects with a lot of "ifs" and "maybes."
The recent decline in oil has many side effects. You see there are many shale oil companies. These are smaller entities that cannot secure funding from standard institutions. They get their drill money from junk bonds. They pay more interest and now, the value of their product is putting a squeeze on them. The total junk bond exposure is 20% of the market for these oil loans. Maybe someone is in trouble?
The ECU had discussed QE aspects. Now, they have put this discussion off until 2015. Maybe someone like Germany opposes the idea.
The Japanese yen is at 119 and heading for 120 as predicted in an earlier blog. The continuation of currency wars with the declining value of fiat money only allows the shine in gold to show forth.
Russia has started a verbal war with the West and another internal war with its own central bank. One leading politician called their central bank, "An enemy of the people!" The ruble has lost 40% of its value and a chain reaction to bonds is causing under the surface problems. Maybe something bad will be exposed?
In the US the Fed has stopped their QE program. They said that they will soon raise interest rates, however they keep changing the guidelines for the day that this will occur. They will have to put up or shut up. Maybe they will lose face as they say in Japan?
In China they have reduced interest rates after the slowdown to their economy. Funny, the reported GDP is always over 7%,and yet, we know those figures are fake. China has a building bubble and maybe something is popping?
India had a change of heart about gold. They ended their restrictions on it. This will cause more buying in gold.
Finally, the leasing rate for gold has fallen so low that it is being offered at give away levels. Many banks and companies use this as an asset to bolster their account balances. This rarely happens. When it occurs, a rally in gold follows.
If these and other aspects continue, gold will benefit. This could be the push that gets gold back to $1350 and a nice Christmas present to you. Peace and good luck!
Wednesday, November 26, 2014
Swiss Vote: Sanity or Insanity
On Sunday the Swiss go to the polls to vote on a referendum with world implications. This small nation has a courageous history not to mention a great cheese. It will get to demonstrate democracy in action. There is a graffiti sign in Argentina which reads, Ni Democracia Ni Dictadura(neither democracy nor dictatorship). The people know their leaders do not do the will of the people, although the nation declares itself as democratic. Someday, the US citizens will realize the same truth, but back to Switzerland.
You have to salute the Swiss for declaring that their nation is neutral in world politics. It allowed them to escape the carnage of WWII. They show what John Lennon sang, Give Peace A Chance.
Deja Vu
The Swiss changed the course of world banking after the Napoleon Era. At the time the House of Rothschild was the main financing source. The Rothschild's picked the wining horse with England, but the French in retaliation moved their money to Switzerland. This led to the rise of the Swiss in international financing. Investors and borrowers knew the Swiss Franc was stable and secure because it was backed by gold. In this era our Founding Fathers turned to gold for the same attributes. They knew this was the best way to establish an economy. Economist at the time knew that stable prices allowed business to plan for growth. No one wanted inflation or volatility in their currency. The Swiss held to this foundation until they were poisoned by modern economists. Their currency is no longer backed by gold, just hope and worthless paper.
Today
There is no price stability. Central bankers print to devalue their currency in order to export, regardless of the consequences to its citizens. It doesn't matter whether we are referring to Yellen in the US, Draghi in the ECU or Taro Aso in Japan or whoever runs the Chinese printing press. They have all printed, devalued and increased inflation in all of their nations or member nations. They have the gall to say that they want inflation, which causes price instability.
The Swiss people are no fools and are fortunate that they have an opportunity to actually express their views to perform democracy the way it was intended. The fiat money centers have mobilized their efforts with media distortions about this gold referendum. You see, the modern economists fear that if this referendum passes and people of the world see how high the standard of living is in Switzerland, maybe their gravy train will come to the end of the line. The Swiss have a chance to save us all from the effects of fiat money which causes wage gaps, inequality, inflation, instability and volatility not to mention that they would be a shining example of how democracy should be carried out.
Please, vote for gold and End the Fed!
You have to salute the Swiss for declaring that their nation is neutral in world politics. It allowed them to escape the carnage of WWII. They show what John Lennon sang, Give Peace A Chance.
Deja Vu
The Swiss changed the course of world banking after the Napoleon Era. At the time the House of Rothschild was the main financing source. The Rothschild's picked the wining horse with England, but the French in retaliation moved their money to Switzerland. This led to the rise of the Swiss in international financing. Investors and borrowers knew the Swiss Franc was stable and secure because it was backed by gold. In this era our Founding Fathers turned to gold for the same attributes. They knew this was the best way to establish an economy. Economist at the time knew that stable prices allowed business to plan for growth. No one wanted inflation or volatility in their currency. The Swiss held to this foundation until they were poisoned by modern economists. Their currency is no longer backed by gold, just hope and worthless paper.
Today
There is no price stability. Central bankers print to devalue their currency in order to export, regardless of the consequences to its citizens. It doesn't matter whether we are referring to Yellen in the US, Draghi in the ECU or Taro Aso in Japan or whoever runs the Chinese printing press. They have all printed, devalued and increased inflation in all of their nations or member nations. They have the gall to say that they want inflation, which causes price instability.
The Swiss people are no fools and are fortunate that they have an opportunity to actually express their views to perform democracy the way it was intended. The fiat money centers have mobilized their efforts with media distortions about this gold referendum. You see, the modern economists fear that if this referendum passes and people of the world see how high the standard of living is in Switzerland, maybe their gravy train will come to the end of the line. The Swiss have a chance to save us all from the effects of fiat money which causes wage gaps, inequality, inflation, instability and volatility not to mention that they would be a shining example of how democracy should be carried out.
Please, vote for gold and End the Fed!
Thursday, November 20, 2014
Housing=Jobs=Economy
The title equation is simple enough and it is used by every nation even before nations became modern states. However, in a consumer economy like in the US, it is the leading component of its economic structure. In a nation of over 300 million, the birth rate and immigration ensures that 150,000 new jobs will be needed every month and this will lead to the formation of 1.8 million new households on a yearly basis. So, where does the US stand with the above projections?
NFC South
For those of you that do not follow American football, it is a conference within the league's two divisions. The leader of this group is the Atlanta Falcons, but this team has a losing record. This is the correlation to the US economy. The government, the Federal Reserve and the media all claim that the US has recovered from the 2008 financial crisis, but I disagree.
They Claim
The US dollar is surging. We will soon be oil independent. Job creation has lowered unemployment to 5.7% and housing prices have regained all their losses. In addition, the stock market is at all time highs, inflation is non-existent and the economy is growing. All these things are true, just like the Falcons are in first place except if you open the book not just read the title, then, many problems appear.
Global Economy
Three of the ten largest economies in the world are in recession. Japan is the world's third largest economy and it has returned to recession for the third time since 2008. Prime Minister Abe has instituted a national tax that caused the recession. This same tax is to increase next year, but he has suspended the timeline of this tax. His country has a debt ration of 250% to GDP. Not good.
Brazil is the world's seventh largest economy and it has been in recession for six months. Not only that, its oil giant, Petroleo Brasileriro is under investigation for fraud. Morgan Stanley will write off $8.1B due to this scandal and this will effect derivatives which could cause a negative financial chain reaction. Not good.
Italy has been in recession all this year. It is the world's ninth largest economy. The EU released its GDP for the recent quarter and it is only up .02%. Consider this view of this report. The number is an average which means, many members did not even get positive like Italy. Not good.
In addition, China is slowing and whatever numbers that they release cannot be trusted. Russia is on the brink of recession due to low oil prices. Israel just released a negative quarter, and all the oil economies will suffer with low energy prices. Not good.
Back To The NFC South
The US dollar is up among fiat currencies just like the Falcons are in first place. At .87 cents, it is not even worth its name, a dollar. Within the US economy there are 47 million people or one out of every seven on food stamps. The US government has spent a whopping $3.6T since 2009 on welfare and entitlement programs. This is unsustainable. It gets worse. A report released by the National Inflation Association(NIA)says the US is in debt over $100 trillion due to long-term obligations and the national deficit. This 590% to GDP. Unbelievable! Not good. In addition, child homelessness in the world's greatest economy is 2 million or one in 30 kids or at least one kid in every classroom. This is an increase of 8% year over year. Just like being in first place with a losing record.
Closer Look
How about car sales which have been growing every year since 2009, beginning with the clunker car program? Within the sales are car loans. Within the car loans are sales to sub-credit borrowers, who now are delinquent to the tune of 40%. New name but sounds like sub-prime loans which caused the financial crisis in housing. Delinquency is up 9% in the third quarter. Not good.
Fannie Mae's data on single family homes is down 43% in the third quarter for mortgage insurance and home purchases is down 15% with refinancing down 61%. Not good. Getting back to population, the total new construction is 1.009 million for 2014 and that is far short of the 1.8m needed just to maintain par. The government says unemployment is down, but long-term unemployment has not changed since 2008. In addition, the population has grown since that date, and yet, the workforce is down to its lowest level in 30 years. This is the only truth in unemployment and its not good.
Within housing there are still 5.31 million homes with negative equity, prices have not regained all there losses. The number is an average just like the EU says it has growth of .02%.
Finally, the Census says that the average income in the US is $52,000 a year. Again, the rich are skewing the total numbers because 52% of Americans make less than $30,000 a year and 72% make less than the 52K basis number. This is why we can't pay for our car loans or buy a house. Yes, we are in first place, but like the Falcons, it is with a losing record. We need a new political party that will protect jobs and industry. We cannot keep exporting our wealth, and claim new jobs and industries will form to make up for the losses. Those jobs come with a slogan, "Would you like fries with that?" In addition, to make a dollar a dollar again, we need to end fiat money and the culprit of all our problems, End the Fed!
NFC South
For those of you that do not follow American football, it is a conference within the league's two divisions. The leader of this group is the Atlanta Falcons, but this team has a losing record. This is the correlation to the US economy. The government, the Federal Reserve and the media all claim that the US has recovered from the 2008 financial crisis, but I disagree.
They Claim
The US dollar is surging. We will soon be oil independent. Job creation has lowered unemployment to 5.7% and housing prices have regained all their losses. In addition, the stock market is at all time highs, inflation is non-existent and the economy is growing. All these things are true, just like the Falcons are in first place except if you open the book not just read the title, then, many problems appear.
Global Economy
Three of the ten largest economies in the world are in recession. Japan is the world's third largest economy and it has returned to recession for the third time since 2008. Prime Minister Abe has instituted a national tax that caused the recession. This same tax is to increase next year, but he has suspended the timeline of this tax. His country has a debt ration of 250% to GDP. Not good.
Brazil is the world's seventh largest economy and it has been in recession for six months. Not only that, its oil giant, Petroleo Brasileriro is under investigation for fraud. Morgan Stanley will write off $8.1B due to this scandal and this will effect derivatives which could cause a negative financial chain reaction. Not good.
Italy has been in recession all this year. It is the world's ninth largest economy. The EU released its GDP for the recent quarter and it is only up .02%. Consider this view of this report. The number is an average which means, many members did not even get positive like Italy. Not good.
In addition, China is slowing and whatever numbers that they release cannot be trusted. Russia is on the brink of recession due to low oil prices. Israel just released a negative quarter, and all the oil economies will suffer with low energy prices. Not good.
Back To The NFC South
The US dollar is up among fiat currencies just like the Falcons are in first place. At .87 cents, it is not even worth its name, a dollar. Within the US economy there are 47 million people or one out of every seven on food stamps. The US government has spent a whopping $3.6T since 2009 on welfare and entitlement programs. This is unsustainable. It gets worse. A report released by the National Inflation Association(NIA)says the US is in debt over $100 trillion due to long-term obligations and the national deficit. This 590% to GDP. Unbelievable! Not good. In addition, child homelessness in the world's greatest economy is 2 million or one in 30 kids or at least one kid in every classroom. This is an increase of 8% year over year. Just like being in first place with a losing record.
Closer Look
How about car sales which have been growing every year since 2009, beginning with the clunker car program? Within the sales are car loans. Within the car loans are sales to sub-credit borrowers, who now are delinquent to the tune of 40%. New name but sounds like sub-prime loans which caused the financial crisis in housing. Delinquency is up 9% in the third quarter. Not good.
Fannie Mae's data on single family homes is down 43% in the third quarter for mortgage insurance and home purchases is down 15% with refinancing down 61%. Not good. Getting back to population, the total new construction is 1.009 million for 2014 and that is far short of the 1.8m needed just to maintain par. The government says unemployment is down, but long-term unemployment has not changed since 2008. In addition, the population has grown since that date, and yet, the workforce is down to its lowest level in 30 years. This is the only truth in unemployment and its not good.
Within housing there are still 5.31 million homes with negative equity, prices have not regained all there losses. The number is an average just like the EU says it has growth of .02%.
Finally, the Census says that the average income in the US is $52,000 a year. Again, the rich are skewing the total numbers because 52% of Americans make less than $30,000 a year and 72% make less than the 52K basis number. This is why we can't pay for our car loans or buy a house. Yes, we are in first place, but like the Falcons, it is with a losing record. We need a new political party that will protect jobs and industry. We cannot keep exporting our wealth, and claim new jobs and industries will form to make up for the losses. Those jobs come with a slogan, "Would you like fries with that?" In addition, to make a dollar a dollar again, we need to end fiat money and the culprit of all our problems, End the Fed!
Thursday, November 13, 2014
Recession>Facing Largest Global Union
No. Not the people who work for Boeing or the airline industry, although those companies use underhanded labor tactics. This is an economic superpower that has severe structural problems, excessive debt, aging population and historical ego's as obstacles.
For those who guessed the European Union, you get a gold star. For everyone else, this is why.
Population
if added together, it is greater than the 300 plus million in the US. Language is not the problem. The setback here is the majority is past its peak spending years and looking toward retirement. This means less productivity and places an economic burden for workers to support the pension plan.
Unemployment
The US does not use honest numbers. The recent news of declining unemployment does not tell the whole story. The US divides unemployment into recent and long-term. The news in the media is recent. The long-term has not changed from the 2008 financial crisis and the best, clearest picture is the population ratio to workforce which is at its lowest in three decades. However, the global slowdown shows itself in the EU work numbers. They are scary and offer little hope for a lot of people.
*France at 10.2%
*Poland at 11.5%
*Italy at 12.6%
*Portugal at 13.1%
*Spain at 23.6%
*Greece at 26.4%
The official average for the union is11.5%. As a whole people cannot find good jobs. They turn to government for answers like socialism. The concept has some good points like retirement benefits, but you cannot have a society where one half works only to be taxed to support the other half. This is the central structural point that needs a new direction.
Euro
Anyway, because the economic outlook has diminished, this has effected the value of the common currency. This decline has helped exporters like Germany, but it causes economic hardship for all members. Just like the counterpart in the US, the CPI is fudged. It does not reflect energy and food costs. At the moment oil prices are falling and this will help in the near term, but long-term it indicates lower demand from the global market. This is telling us that the world outlook is declining and this only adds pressure to budgets everywhere. In addition, the EU has put deflation front and center which only hides the real effects of inflation. It has also started its own version of QE which will dilute the value of the euro even further. The euro has declined from 138 in January to 124 now, and still falling.
Banking
The EU banking system is larger than the US. However, the banks have not fully recovered from the 2008 financial crisis. The largest bank is Deutsche Bank. This bank has used the dangerous derivative market to get back on track. They are exposed to $75T. They are not alone. This is a common practice in European banks. They are walking dead, zombie banks. If one goes, a chain reaction could hurt Europe and the world.
Debt
Just like the US and everywhere, the mirage in the desert of economic growth is debt. It is fueled by central banks and government. The problem with debt is it must be repaid and it is growing faster than European economies and world economies for that matter. It is like a virus. It is unseen and deadly and grows with interest.
Add It Up
Putting it all together this voodoo mixture, concocted by fiat money has all negatives in the pot at the same time. You have high unemployment. You have high debt. You have an aging population that explodes budgets with less revenues. This brew could boil over or using political correct language, a bursting bubble.
Thursday, November 6, 2014
Japan: Charging Into The Next Financial Crisis
Last week on the eve of Halloween, the Bank of Japan announced that they were beginning a new stimulus program to buy government bonds to the tune of $730B for the year. This will add to the debt ratio which is already the world's highest at 250%. They will be buying 85% of state obligations. This is up from 70% because no one else in their right mind will these unrepayable notes. The US Fed now buys 63% of the government's notes. This is up from 50%. Can you see a trend here? By the way the Japanese purchases is equivalent of US purchases at $3T a year. Think about that for a moment. Now, personalize it. You make $35K a year, but you owe or have accumulated obligations of $87.5K. You can't pay your bills! By some quirk of fate, a credit card company offers you a card, to which you pay your $87.5K off, but now, you owe someone else that much and more with interest. Interest is the key word. You are charging towards financial destruction. This is what all fiat central bankers are doing and the Bank of Japan is leading the way.
"Only the Lonely..."
thank you, Roy Orbison. Sweden recently joined the club as it enacted its third phase of rate cuts after it raised them to combat inflation in 2010 and 2011. It is trying to devalue its currency to gain market share, which is a by-product of central banks QE programs. The ECB also raised rates in 2008 and twice in 2011 for the same reason, but now faces a recession. No central bank declares that the fiat model is a failure. They just increase the money supply to overwhelm any economic declines in activity. They believe that economic engineering works, but I beg to differ.
C-Japan
All its manipulating money spending has not lifted prices of its stock market or housing. They are at one-third of where they were 25 years ago. Central bankers believe money engineering will answer economic problems, but the equation is human not abstract. How do you equate or replace ageing, retirement and dying? How do you measure pension obligation that will increase due to longevity? How do you compensate falling revenues which add to the debt ratio? In Japan, household income declined by 6%, and it is expected to fall further, especially when a national sales tax is added to the economy.
Thanks Japan
They have more than demonstrated that the fiat model fails to maintaining the value of your currency, which is purchasing power, fails against inflation and puts your whole nation under the risk of collapse. Hey, I forgot to mention it allows your exports to grow which favors segments of society at the expense of all its citizens who pay higher prices for imports. This is the plan of Sweden, ECB an all countries that seek a lower value for their currency. Today, the US dollar is up at .87 cents. Dear reader, that is very, very sad. The world's reserve currency is worth less than a dollar, although the bill says it is a dollar. The Euro is down to 1.24 and like my previous blog on Japan, the Yen is at 114. Does anyone remember Zimbabwe? Weimar Republic? Japan is charging towards both of them with all central bankers followng
"Only the Lonely..."
thank you, Roy Orbison. Sweden recently joined the club as it enacted its third phase of rate cuts after it raised them to combat inflation in 2010 and 2011. It is trying to devalue its currency to gain market share, which is a by-product of central banks QE programs. The ECB also raised rates in 2008 and twice in 2011 for the same reason, but now faces a recession. No central bank declares that the fiat model is a failure. They just increase the money supply to overwhelm any economic declines in activity. They believe that economic engineering works, but I beg to differ.
C-Japan
All its manipulating money spending has not lifted prices of its stock market or housing. They are at one-third of where they were 25 years ago. Central bankers believe money engineering will answer economic problems, but the equation is human not abstract. How do you equate or replace ageing, retirement and dying? How do you measure pension obligation that will increase due to longevity? How do you compensate falling revenues which add to the debt ratio? In Japan, household income declined by 6%, and it is expected to fall further, especially when a national sales tax is added to the economy.
Thanks Japan
They have more than demonstrated that the fiat model fails to maintaining the value of your currency, which is purchasing power, fails against inflation and puts your whole nation under the risk of collapse. Hey, I forgot to mention it allows your exports to grow which favors segments of society at the expense of all its citizens who pay higher prices for imports. This is the plan of Sweden, ECB an all countries that seek a lower value for their currency. Today, the US dollar is up at .87 cents. Dear reader, that is very, very sad. The world's reserve currency is worth less than a dollar, although the bill says it is a dollar. The Euro is down to 1.24 and like my previous blog on Japan, the Yen is at 114. Does anyone remember Zimbabwe? Weimar Republic? Japan is charging towards both of them with all central bankers followng
Thursday, October 30, 2014
We Want Deflation, They Don't
There are great scientific laws of motion from Isaac Newton, which I feel can pertain to our own economics and the economy as a whole.
- For every action, there is an equal opposite reaction.
- An object in motion will not change velocity unless an external force acts upon it.
If one were to inject the two principles into the economy, one would realize that they work well with the concept of inflation versus deflation.
Deflation
is the absence of price increases.
Inflation
price increases are present.
I feel that the current climate of deflation in our economy is a result of Newton's first law. The stimulus from the Fed and our government policies are suffering from the equal opposite effect of their actions. This is a good thing for everyday citizens. Deflation offers two great economic benefits: price stability and it lowers the cost of living which raises your standard of living.
Our government and the Federal reserve hate and fear deflation, however they have used the concept to allow them to stabilize our economy, so that they can resume their policy of price inflation. This is why I declare that we need a new political party that is for the people. The two parties in power violated the constitution by creating the Federal Reserve and the guiding principle of the founding fathers, "To promote the general welfare." Let's put this into our everyday experiences.
Everyday people seek to avoid inflation in their lives. We skip steak for hamburger and now, we cannot afford burgers, so we eat chicken. We do this so we can pay our other bills and needs. The people that we elected institute policies that raise prices, even argue the benefits of inflation, regardless of the pain it causes to its citizens.
Consider Newton's Law
The Fed injected money into our system. This is not wealth created from a contribution to society like electricity and the industry that resulted from the invention. This is diluting the value of our currency and lowering our standard of living. This action is inflationary. The reaction to this policy is deflation. Hold that thought.
Flashback: 2002
Prior to the recent Fed action of pumping artificial, worthless paper into our economy, they kept interest rates low which also applies to the second law of Newton.(an object in motion...)
Housing is the biggest purchase in our consumer society. The stock market caused a crash with the dot.com bubble of 2000. The Fed came up with the idea to boost the economy through housing, but it was stagnant, a body at rest. By the lowering of interest rates, added with a stronger dollar during that time, together formed a stimulus to the housing market.
Let's Get Real 2002:
I'm selling my home for $100K. You can buy it with a payment of $650. per month before the boost. Now, with the Fed's help, it only cost $450. per month. Anyone with an IQ of 80 can pick the $450. a month deal. That dear reader, is deflation.
The Fed used deflation to start the housing bubble and it is again using deflation to reignite it.
Let's Get Real 2014:
Today, the government injected refinance programs like HARP, bank modification deals under the threat of law suits and the Fed helped by lowering the interest rates to below 4%. Now, that $100K home is selling for $200K. They did this to stop the bleeding of price declines(deflation and Newton's first law)and foreclosures. My home has a house payment of $1100. per month at the already historical low rate of 5.5%. Now, it drops to $700. per month because of all the manipulated policies. Same house, but now, using deflationary forces. I have money to spend, but don't get thrifty. No policies for the savers and investors in society. They want you to spend that money.
Deflation has a bad side too. If prices continue to decline, people put off purchases in the hope that it may decline further. This can spiral into a negative consumer cycle, which the Fed fears. However, we have never had an extended period of price deflation, to which the Fed claims will happen.
There are examples of industries where deflation has hurt like mining companies at present. The decline in price of the end product, gold or silver and other commodities like copper, results in the difficult decision to close the mine until prices rise because the break even point has passed. Jobs will be lost not only at the mine, but equipment companies and anyone and everyone connected in those regions. The government doesn't care because this segment is not part of its big picture.
On the flip side, price stability of deflation helps citizens. Even if you don't own a home, think oil. You now pay $3. per gallon, whereas before you paid $4. per gallon for the same amount of gas back in January. You are saving for the first time with whatever wages that you earn. Your living standard will rise. You can afford steak.
This same aspect of deflation helps businesses too. It lowers their costs. This is why the stock market climbs. With lower costs, businesses have more money. However, they have used this opportunity to buy back stock rather than developing new product.
Finally, it allows debt to be restructured. This too lowers cost, leaving more money available after fixed payments whether credit fees, inventory loans or mortgage payments.
The Fed and our government sponsored deflation only because of the financial crisis of 2008. They feared that their policies would implode the system. However, they have society trained like seals. They have plenty of examples to verify. All they have to do is make some announcement to check the pulse. Now, they can return to their big picture because there is house price stability along with rising prices. This is the same formula that the Fed has been using since 1957 after our economy suffered its first haircut. They have us on a staircase. We have just paused on a step. They would like now to resume the price escalation of inflation because they need revenues to cover the debt load that they brought onto our society. These are the policies that erode the middle class, cause inequality in society with hardship under the destruction of the dollar. This loss of purchasing power results in a lower standard of living and it all can be traced to the Fed in 1913. However, we have hope in the fact that Newton is smarter than the Fed or our government leaders. There will be a reaction to the action of the Fed, even if it is painful as we can all pray that we return to the wisdom of our founding fathers to back our currency in gold which will promote the general welfare. This is why I say, End the Fed!
- For every action, there is an equal opposite reaction.
- An object in motion will not change velocity unless an external force acts upon it.
If one were to inject the two principles into the economy, one would realize that they work well with the concept of inflation versus deflation.
Deflation
is the absence of price increases.
Inflation
price increases are present.
I feel that the current climate of deflation in our economy is a result of Newton's first law. The stimulus from the Fed and our government policies are suffering from the equal opposite effect of their actions. This is a good thing for everyday citizens. Deflation offers two great economic benefits: price stability and it lowers the cost of living which raises your standard of living.
Our government and the Federal reserve hate and fear deflation, however they have used the concept to allow them to stabilize our economy, so that they can resume their policy of price inflation. This is why I declare that we need a new political party that is for the people. The two parties in power violated the constitution by creating the Federal Reserve and the guiding principle of the founding fathers, "To promote the general welfare." Let's put this into our everyday experiences.
Everyday people seek to avoid inflation in their lives. We skip steak for hamburger and now, we cannot afford burgers, so we eat chicken. We do this so we can pay our other bills and needs. The people that we elected institute policies that raise prices, even argue the benefits of inflation, regardless of the pain it causes to its citizens.
Consider Newton's Law
The Fed injected money into our system. This is not wealth created from a contribution to society like electricity and the industry that resulted from the invention. This is diluting the value of our currency and lowering our standard of living. This action is inflationary. The reaction to this policy is deflation. Hold that thought.
Flashback: 2002
Prior to the recent Fed action of pumping artificial, worthless paper into our economy, they kept interest rates low which also applies to the second law of Newton.(an object in motion...)
Housing is the biggest purchase in our consumer society. The stock market caused a crash with the dot.com bubble of 2000. The Fed came up with the idea to boost the economy through housing, but it was stagnant, a body at rest. By the lowering of interest rates, added with a stronger dollar during that time, together formed a stimulus to the housing market.
Let's Get Real 2002:
I'm selling my home for $100K. You can buy it with a payment of $650. per month before the boost. Now, with the Fed's help, it only cost $450. per month. Anyone with an IQ of 80 can pick the $450. a month deal. That dear reader, is deflation.
The Fed used deflation to start the housing bubble and it is again using deflation to reignite it.
Let's Get Real 2014:
Today, the government injected refinance programs like HARP, bank modification deals under the threat of law suits and the Fed helped by lowering the interest rates to below 4%. Now, that $100K home is selling for $200K. They did this to stop the bleeding of price declines(deflation and Newton's first law)and foreclosures. My home has a house payment of $1100. per month at the already historical low rate of 5.5%. Now, it drops to $700. per month because of all the manipulated policies. Same house, but now, using deflationary forces. I have money to spend, but don't get thrifty. No policies for the savers and investors in society. They want you to spend that money.
Deflation has a bad side too. If prices continue to decline, people put off purchases in the hope that it may decline further. This can spiral into a negative consumer cycle, which the Fed fears. However, we have never had an extended period of price deflation, to which the Fed claims will happen.
There are examples of industries where deflation has hurt like mining companies at present. The decline in price of the end product, gold or silver and other commodities like copper, results in the difficult decision to close the mine until prices rise because the break even point has passed. Jobs will be lost not only at the mine, but equipment companies and anyone and everyone connected in those regions. The government doesn't care because this segment is not part of its big picture.
On the flip side, price stability of deflation helps citizens. Even if you don't own a home, think oil. You now pay $3. per gallon, whereas before you paid $4. per gallon for the same amount of gas back in January. You are saving for the first time with whatever wages that you earn. Your living standard will rise. You can afford steak.
This same aspect of deflation helps businesses too. It lowers their costs. This is why the stock market climbs. With lower costs, businesses have more money. However, they have used this opportunity to buy back stock rather than developing new product.
Finally, it allows debt to be restructured. This too lowers cost, leaving more money available after fixed payments whether credit fees, inventory loans or mortgage payments.
The Fed and our government sponsored deflation only because of the financial crisis of 2008. They feared that their policies would implode the system. However, they have society trained like seals. They have plenty of examples to verify. All they have to do is make some announcement to check the pulse. Now, they can return to their big picture because there is house price stability along with rising prices. This is the same formula that the Fed has been using since 1957 after our economy suffered its first haircut. They have us on a staircase. We have just paused on a step. They would like now to resume the price escalation of inflation because they need revenues to cover the debt load that they brought onto our society. These are the policies that erode the middle class, cause inequality in society with hardship under the destruction of the dollar. This loss of purchasing power results in a lower standard of living and it all can be traced to the Fed in 1913. However, we have hope in the fact that Newton is smarter than the Fed or our government leaders. There will be a reaction to the action of the Fed, even if it is painful as we can all pray that we return to the wisdom of our founding fathers to back our currency in gold which will promote the general welfare. This is why I say, End the Fed!
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