Month: Nov 2013

Bills, Bitcoins, Bullion and the Death of Cash?

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Today’s rant is about Money…As the Fed, prints another 85,000,000,000 crisp new dollar bills, we have to ask…

“Where does that money go?”  “Well, they don’t actually print that money do they?”  Well, that depends on who you ask.

The money gets loaned into existence, so perhaps no, they don’t really print off that money, it just gets lent to the Government via an I.O.U.  The Government gives the IOU to the Fed, who pays the government the money, then the Fed,, takes that IOU to the major Banks, They lend the money to the government at the prevailing interest rate (i.e. the discount rate), and the bond (IOU) then gets sold to the money markets who are essentially looking for a safe return on their surplus assets – you know, the money they don’t want to risk in the stock market, so that they can pay the pensions of those pensioners who have already retired, or the insurance companies, who need to have spare capital to pay out to claimants or for funerals etc..

The government of course get the money from taxes to pay the interest, (and the principal – that’s the money borrowed) and as long as the taxes covers the interest payable, the money markets really don’t give a damn.

However, when times are tough, and the economy suffers, the taxes the government collects go down, and their spending doesn’t, so the Fed steps into the breach, to fund the deficit.  Of course when a government is fighting a war, it needs even more money, and of course people in the military do not produce anything, so they don’t add to the stock of goods in the economy. And despite their protestations, they don’t really pay taxes, though they see it going out of the pay packets – If I give you $100.00 from the Tax coffers, and you give me $10.00 back by way of tax – how have you paid a tax? All you’ve done is give me back some of the money that others have earned…(and that goes for all government workers by the way) Anyway, that’s another story for another day.

Sometimes though the government spends way more than the economy can really accommodate, and that disincentivizes people, who don’t start a business, or who move overseas to escape the high taxation. In recent years the U.S. has experienced an increasing number of people who are renouncing their citizenship and moving overseas to escape the high taxation.

Of course, the inventive ones search for ways to escape taxes, and of course there are those who think government should be a lot smaller.

And that leads me to the meat of this rant… A Japanese man Satoshi Nakamoto decided to try to escape his governments free spending ways and as a software developer came up with a way for people to exchange values without.money changing hands, and a way that wasn’t controlled by the government.  That was back in 2008. In 2011. Bitpay Inc., the company was founded, and Bitcoin became a worldwide success. Initially the Bitcoin, traded at a discount. However, in the last year, the price has risen and fallen, and risen some more.

During the last few weeks, the price reached the dizzy heights of $700, and briefly touched $878. On a Max Keiser show the other day, Max interviewed one of the early adopters, who suggested that Bitcoin was the future, and that the far east had become its main focus of attention as it had been more widely adopted there. He added that the U.S. had reluctantly adopted it, partly for technology reasons, as certain parts of the country lacked the technological infrastructure.

Bitcoin has been seen by its evangelists as the antidote to Big Government, and a rein on their free spending ways, which ultimately will rob government of its fiscal recklessness. However, as the value of Bitcoin has risen, alternatives have begun to spring up. Litecoin, and upto 80 others have begun to vie for the attention of the value exchanges.

In my own locality, the local Bus Company has a no cash payment system known as MIDAS. Here you load up a pre-pay card, and then when you board the bus, you deduct the payment electronically, and thus don’t need to carry cash.

This is one more nail in the coffin of cash, its exponents argue, but as lots of other alternatives compete for the investment dollars of the world, we have to ask… Is this so?

What is money?

As I’ve said in previous posts, money has to serve several functions to really be useful.

Its most important function is as a store of value, though portability, durability, fungibility and is widely accepted as such are others.

Bitcoins, Litecoins, and the 80+ others might serve some of those, but how do we know for example whether they are limited in supply?

When we buy a Bitcoin, we are buying software. Software is just a series of magnetized elements on a storage medium – 0s and 1s. However the software is written by humans, and unless we can see the source code, and the source code of the compiler used to translate the human readable code into the computer code, then we can’t  be REALLY 100% sure – Can we?.  And given that we humans are a trusting species, we tend to take on face value when we hear that a company has carried out the necessary checks – we have a tendency to trust them.

But as we have learned in recent years there are organisations who have been less than trust-worthy. The Banks for example.

JPM recently agreed to pay $13bn, as a result of its misdemeanours. HSBC agreed to pay £1.2bn (circa $1.9bn) for money laundering offences in December 2012, and was also fined $2.5bn in October 2013, with 16 major financial institutions colluding to rig the LIBOR rates. HSBC is also alleged to have been the recipient of $15 Trillion for onward transfer to other Banks in Europe (The full story can be read in – “The Coming Battle” ) – during the heat of the 2008 crisis

Gold and Silver, are only less useful these days as money, because the Banks have colluded to lower their true value, by market manipulations. The Fed which hasn’t been audited since 1953 properly gave a cursory glance to journalists in 1973, but has resisted all attempts since. In fact stories abound that the true amount of Gold that they are supposed to be holding, is far lower than the 8,700 tonnes for which they have entries on their Balance sheet.

So, why would we trust a software house, with millions of shareholders to satisfy, to limit, the number of these crypto-currencies.

We can but ask.

My firm belief is that sometime in the next 2-3 years, the Chinese government will announce to the world, that it has stored in its vaults 10,000 tonnes of the yellow metal, and if, (or when) that happens, then our current world currency system will come to an end, and if a world currency is to be formed, at its heart will be precious metals. And the price to buy will be perhaps 8 times what it is now.

A period of tumult is coming.

Gold and Silver will protect those with the foresight to prepare for this eventual re-organisation. The Coming battle is for a limited time available  – Sorry No longer available for FREE

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‘J’ Curve Conundrum.

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Thomas Malthus, was a Reverend at the dawn of the Industrial Revolution in England. In 1798, he wrote an essay, “Essay on the Principle of Population”, which was concerned with the rising population, and theorised that improvements in subsistence would lead to higher growth in population, which in turn would mean competition for resources, wars etc, which would lower standards of living back to subsistence level.

Of course back then he couldn’t have envisioned the dramatic changes in technology, and the inventiveness of we humans, nor of the advances in food production, and at how much land has been turned over to agricultural use.

We see examples of this in countries where historically the people had large areas of un-developed land: For example, in areas such as Argentina, which has large tracts of savannah – open grassland – and Brazil which has huge jungle and forest areas.

This led Argentina to grow Beef cattle, which was ideally suited to their environment and during the early 1900s, Argentina was one of the richest six or so countries on the planet.

In the last few decades, we have seen how forests and jungles have been cleared in increasing proportions, particularly in Papua New-Guinea, and Brazil with their rising populations, and need for more cultivated land, but also the loss of habitat for native species, and a rapid fall-off in biological diversity. Brazil of course became famous for its coffee crop, and more recently sugar cane, which it uses ( after processing into ethanol, ) in its efforts to minimize its oil costs by using it in its Taxi fleets, and other vehicles.

But was Malthus that far wrong? Back when Thomas Malthus was alive, there were just one billion people. By 1927, there were 2 billion. In 1960, that became 3 billion, and by 1974,  4 billion.  As of 1987, the population of the planet was about 5 billion inhabitants, and by 1999, that was 6 billion, in 2010, we passed the 7 billion mark, and those who make these predictions think we will surpass 9 billion by 2030-35, which means at current rates, we are adding 1 billion every 10-12 years on average.

With China announcing it will amend its one child policy so that those people who satisfy certain conditions, may have another child – this may drive growth faster. However, cultural norms which favour boys over girls, is precisely the policy which may lead to more men who do not have a partner when they reach sexual maturity, and this we know leads to higher sex crimes. But may also add to instability, and a political drive to find use for these men in the military.

But  if this means more unemployment, and higher demand for food at a time of maximum worldwide output, is this a recipe for wars over resources? And as China increases its economic muscle, so  it will increase its military muscle, and already there are rising tensions in the South-China seas, as Vietnam, Indonesia, Japan, and Philippines have rising demand for energy, and other resources which may be buried beneath this contested stretch of water, at a time that Chinese Naval vessels are patrolling and harrassing other ships in the area. Vietnam even mentioned its concerns in a broadcast on Vietnam’s Overseas broadcasts, which it is known that America monitors. Was this an open request for America to intervene?

Of course, back when Reverend Malthus was postulating, he studied rabbits, and of course mixamotosis cured that particular problem for decades when it first appeared in the 1900s. By the same token, wars such as WW1, and WW2 reduced the numbers of humans at a time of rising populations and lower economic activity, and have no doubt lowered the total populations that we see today. So, is therefore ,WW 3.0 almost inevitable?

If we study almost all “bubbles” from the South-Sea bubble of the 1780s, to the Dot-Com mania of the late 90s and early noughties, we realise that – as the old saying goes – “What goes up, must come down”.  Does this apply therefore to populations?  And if not, how do we cope with 10 billion plus people on the planet by 2050, given that the amount of land is finite, oil, gas, and other mineral resources particularly, take increasing amounts of energy and finance to find, but the biggest hurdles will be potable water, and food.

The unrest in the middle-east will be as nought if we do not as a species collectively address these hurdles. Many African countries have shared the vast river resources of the Blue and White Nile rivers, but what if one country through which the rivers pass takes more and more water for agriculture, and thus leaves less for those countries downstream?

In 2008, food riots broke out in 40 countries.  Aquifers are currently being depleted at phenomenol rates, and many will be empty by 2025. What is less well known is that these take 6,000 years to fill, and it takes 1,000 tonnes of water, to grow 1 tonne of Wheat.

And just since the year 2000, water demand has surged 58% worldwide.

So, everything is about to get VERY expensive

Precious Metals too suffer from this, and one of the few ways to protect yourself from what is to come, will be to hoard those resources that do not diminish over time. – Which brings us back to money – Not currency – A piece of paper, is a piece of paper, even if it does have $100 printed on it.  JP Morgan used to say “Gold is money, everything else is credit”, but Gold or Silver are also things of beauty, and when times are tough as we may be heading for, then possession is nine-tenths of the law, and the value of that money will  be preserved during inflationary times. Silver too, is a fungicide, a bactericide, and virucide. Kings and Queens, would in years past only drink from Silver vessels – a way to make potable water?

As Central Banks and particularly the Fed, manipulate the precious metals markets, we see Art prices rising inexorably – just as happened in the mid 1970s. Those seeking a return on their capital or who wish to move their capital to an overseas market to limit their tax position, may pay for an art-work, and ship it overseas where some years later they sell at a profit, and pay less in taxes.

Pop art icon, Andy Warhol, had a piece recently sold at auction, at over $100million. The Art market is telling us a subtle truth – the dollar is losing purchasing power, relative to things – Art in particular. The time will come for precious metals too.

Speaking of which, I’ve been reading more bullish sentiment of late regarding Silver Prices…

A couple of PM specialists feel that the bottom has already been and gone, and that we might see a new yearly high this year, and an all time high next year.

Having commented already on where I think Gold will go elsewhere, I suspect (But hope I’m wrong) that silver will remain in the doldrums for another 2 years or so, before we see a new all time high.

As things stand, Silver prices are not just based on investment demand. Supply is variable based on other commodity production – it is a by-product of several other mineral production… Zinc/Lead/Nickel/Copper/Gold mining in many mines, which with increases in growth in other markets will stimulate production of these other commodities (and thus silver).

As the price at the moment is still just above where mines can be profitable, then there’s not much reason to cut back production. (New mines are a different matter)

That said, there’s lots of new technology, which should keep demand up – with 10,000 uses, and the most widely used substance after oil – and if investors still keep buying silver coins and rounds/bars at unprecedented levels, at these low low prices, then once prices start to turn up, this will suck in the wider investment community, and we will see the blow off phase. (the J curve where the price goes vertical)

Of course, when that happens, that might be the end of the Dollar, though the U.S.’s rising oil production may overturn that as fewer dollars head overseas to pay for oil, and thus as some of those dollars return home for software, and other high-tech products, then this may strengthen the currency.

That said, hopefully, we’re at the turning point for precious metals. Anyone interested in buying Silver at V.A.T. free prices might want to learn where and how they can do this – Here

Money, Gold and Bitcoin… What’s a Government to do? (Mon, 18th Nov, 2013)

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As the Philippines begins receiving Aid, from around the world, yet another disaster occurs, this time on the other side of the planet, in the U.S., as a Tornado hits Tornado Alley – unusual for mid November (apparently). A number of deaths have been reported. Once again we watch from the sidelines, and furrow our collective brows, seemingly unable to do anything except show our sorrow, and pass on our good wishes to those involved, and our condolences to those who have lost loved ones.

Is it just better communications, and thus we’re hearing about these things more frequently, or are there simply more of these natural disasters? We can only speculate at this time.

The implications for money though should be obvious. Someone has to pay for the reconstruction and the damage.

In the absence of Insurance, those buildings will probably never be replaced, The land holders will maybe invest money, that either had been sitting on the sidelines waiting for investment opportunities, or was already scheduled for investment elsewhere, meaning that either the opportunity doesn’t get the investment dollars, or someone somewhere “prints” the necessary money, increasing the supply of dollars, and probably Philippine Pesos.

Back when I first started commenting about the Precious Metals marketplace, it was a little African Gold miner with a foothold in Zimbabwe and an influx of capital, as 5 Directors put up £100,000 each to re-start operations on a grander scale that first caught my eye.

Anyway, back then (late 2003) I did my analysis, and lept to the conclusion that Gold would ultimately reach circa $8,500/oz, and that after an initial burst to circa $2,000, it would drop back by half (circa $1,000.).
 
WHY? What prescience did I have?

I simply looked at the chart of the 70’s and multiplied by ten.

From the mid 1960’s, it was obvious that Gold was coming under pressure, from Britain, France and Italy who all remonstrated with the Fed (who were funding the Vietnam war effort at the time) for their profligacy and money printing.

The Gold price had gone from $25.00 in 1932, to $35.00/oz after the Federal Reserve got their hands on all the Gold, and there the price stayed until August 15th 1971.

However, maybe Gold was slightly overvalued back during the early 60’s and really the price should have been closer to $25.00…

Anyway, if you recall, the 2001/2 bottom in Gold was $254.00 and that was a near enough ten-fold price improvement on the theoretical 60’s price. Wages had gone up similar levels – I’m old enough to remember wages from that era, as I was already working back then, and remember the slogan £20.00 for all in 1971-72 here in the UK. and circa £30, was a grown working man’s wage.

The Silver price per ounce bought roughly one barrel of oil, and ten years later as it peaked at close to $50, it still did.

Of course since then Central Banks have been divesting themselves of silver – an even more barbarous relic than gold? And If I recall accurately, oil fell to $18/bbl during 2000/1 – I certainly remember paying between 99 cents/gallon and $1.06, in Austin Texas back in late 97 anyway, when I worked at Dell Headquarters in Roundrock, just 8 miles from the  city centre…

So, where does this lead me? To the inevitable…

Gold will certainly rise, but to where? It is unlikely that a steady rise in the price is likely, because that would mean moth-balled mines would begin re-opening, and an increase in supply, which would counteract price rises.

At $2,000 almost all current Gold mines would be profitable, so the price has to (MUST) remain in the doldrums to choke off supply, It is imperative then that those who control the world’s money supply, target the alternative currency – just as we learn again the U.S. legislators are seeking to interfere in the market for Bitcoins, as the price has risen again to a new high as it peaked at just over $600, before dropping back in recent days.

 
Gold MIners therefore have to sit on the sidelines perhaps, or maintain mines either in loss making situations, and depending on cost structures reduce output, or run at marginal profits. Not possible for all except those with huge reserves of cash, and reserves of metals too, with low fixed costs, hoping and waiting for an upturn.

I don’t know enough about the miners to know which of the dozens fall into that category, but Turquoise HIll (TRQ:TVX) is perhaps one, unless the Mongolian Government gets greedy again. (They used to be known as Ivanhoe Mines Ltd – until Rio-Tinto (RIO:L) increased its shareholding to 51% and re-named the Company)

BUT if my tenfold theory holds, then $8,500 would seem a likely zenith, as a move into five figure territory would be too horrific to contemplate for the Banksters, who would defend it to the last and throw everything they had at the price. One only has to look at the 3-Day Kitco Gold and Silver Price charts (http://www.kitco.com/images/live/gold.gif)(http://www.kitco.com/images/live/silver.gif), to see that outside the New York time period, the price oscillates as a result of High Frequency Trading to maintain price stability. We can only speculate as to WHY?

BUT a rise to the suggested figure is likely, and above is not outside the bounds of possibility given the reckless money printing in the last 5 years….

Incidentally, Peter Schiff, who is a major commentator on Gold, and the Fed’s mess, as he might call it, was on the Max Keiser show on RT late last week, and very interesting he was too. Though TBH, I think his timing is out by a couple of years, as the economy stutters along for a little while with QE-infinity still in evidence.

He feels that they won’t taper next year, because as soon as they announce they might, the markets will tumble, and bond prices will fall, raising yields (and thus interest rates) choking off any hint of growth, which is very likely.

 
But, if my timescale holds, then circa 2018 – 2019 is when Gold and Silver prices will rocket. Why?
 
Demographics. The Baby-Boomers were born over a 15 year period from 1947, to 1962. and peaked circa 1957/58, ten years after the soldiers and sailors got back from their war postings overseas.  All that pent up sexual energy went into making babies, and the first of those early retiring babies began leaving the workforce in circa 2005. The first 65 year old baby-boomers reached retirement age in April 2012, so the money supply growth should be trying to counteract this major force of economics until 2022, but of course, those with savings will be worried about inflation, and whenever that begins to take off – Gold and Silver miners will receive a large chunk of it.  
 
If the money supply doesn’t shrink sometime soon, then it will have to grow to match prices or risk deflating the already shrinking economy, further hurting growth, which means even more dollars chasing precious metals, artwork, diamonds, and all other kinds of physical resources to preserve wealth. 
 
The next ten years will I suspect be pretty much a re-run of the same era a century ago. The first world war began as a Serb assassinated the Austrian Archduke and his wife, who at the time controlled parts of what is now Serbia.  
 
Will this era signal the end of the American Empire? And the emergence of a new one – further east?
 
We shall see…

Death and Democracy

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I was watching the Max Keiser Report on RT this morning, and he referred to a couple of International Statutes that have either been enacted, or are under negotiation. These pieces of legislation are International Treaties, and the first appears to be already on the statute book – TPP – the Trans-Pacific Partnership between the U.S. and 11 other Pacific Rim countries.

The other – TAFT – Trans-Atlantic Free-trade treaty, appears to be being secretly negotiated behind bureaucratic closed doors, which seeks to elevate the Corporate Organisation to the level of the State.

“How so?”, I hear you ask… The agreement seeks to give the International Giant Corporations of the U.S., the right to take Governments to the courts for… Get this… Any act which impinges on potential future profits, meaning they can be brought before these courts.  I have no details on where, when, or who will sit on the judging panels, but you can bet they’ll be stuffed with like-minded stooges. A similar panel set up to regulate the Banks in the U.S. has lost only 1 of almost 100 cases, and the person who agreed to the win got fired as a result.

Max Keiser gave the example of a certain “Oil Corporation” in a South/Central American state causing an ecological disaster, and having the right to sue the government (who get their money from tax-payers – let’s not forget) if they impose environmental charges on the ecological damage they commit.

And who elects the officials of these huge Corporations? Yep, that’s right, the same folks who own the shares, of these huge corporations, and who also control the money supply – the old money families who set up the Federal Reserve… I should perhaps also remind readers, that the old dear – “The Fed” is about to reach a milestone that many will not be aware of, and maybe it’s time a new institution replaced these old fiat-money bankers? But I’ll get to that in a future post.

The milestone? Oh yes… The Fed reaches her 100th Birthday in just 6 weeks – on December 23rd 2013.

I believe after 100 years, the old dear ought to be put out to grass, and retired gracefully, because her printing presses, have funded the Second World War, countless clandestine operations by the CIA, the Vietnam war, Taliban (Mujahadeen?) and anti-soviet Chechen rebels, and in recent years enabled the U.S. to embark on its War on Terror which has given the U.S. military the funds to encircle the globe with its tentacles, breathing ‘fire and brimstone’, toppling the Governments of several countries, and killing citizens of countries, without having to stand up in court and argue its case for a death sentence by its use of drones.

In so doing, they have over-reached themselves, and driven world-wide sentiment against them.

The Fed may not have set out with evil intent, but the inevitable consequences of having no restrictions placed on their reach, as the old saw goes is: “Power corrupts, and absolute power, corrupts absolutely” Because no other country has access to these printing presses, they have a unique position, which they are widely regarded to have abused.

As my post mentioned yesterday, the antidote to this is Gold and Silver. When the Chinese have over 10,000 tonnes of Gold, which I firmly believe they will have by the end of 2014, or 2015 at the latest, then the U.S. dollar will cease to be used as the world’s reserve currency, and the U.S.’s military strength will lessen, weakening its grip on the world.

And that might just be the start of a meaningful move away from the corporate feudalism, that has emerged in recent decades.

It might also mean that Gold and Silver achieve their true value. So without wishing to give investment advice, perhaps a small purchase in these money metals might prove prudent for the decade to come.

Until next time…

W.

A Fed Apology (Wed 13th Nov 2013)

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The aftermath from the Typhoon Haiyan disaster in the Philippines is now being more widely reported, and the scale of the disaster is now being revealed. Scenes of sheer devastation greet the eye. Our sympathies extend to those poor benighted people..

That out of the way, we turn to money matters once more and while dipping into Bloomberg earlier today, I heard something, I never thought I’d hear – An apology… Not from  our own financial or political masters, but from a former Fed Official

Andrew Huszar, a Federal Reserve Official for nine years, wrote an Op-Ed piece in the Wall Street Journal this morning and in it wrote:

“I’m sorry America… As a former Federal Reserve Official, I was responsible for executing the centre-piece program of the Fed’s first plunge into the bond-buying experiment, known as Quantitative Easing.”

An apology? What for?  His interviewer Erik Schatzker asked him the same question,  His answer, surprisingly, didn’t surprise. He said: “We knew after QE1, that it wasn’t working.” He went on to add that they knew that their efforts really just bailed out the Banks, but his final admission is what shocked me, when he said that the economy was in a similar if not worse state than it was in 2007.

Erik’s co-presenter – Stephanie Ruhle jumped on that suggesting that the growth was better, etc etc, and he acknowleged it was, but that suggests all is not well…

Well there’s a surprise… Peter Schiff, who runs The Schiff Report, also thinks the Fed’s actions were bizarre, and that the damage will come back to bite us all in the derriere.

Of course the Chinese are using some of the Fed’s largesse to buy up as much gold and silver as they can. According to several reports, their imports through Hong Kong have steadily risen from about 36 metric tonnes in 2001, to 86 tonnes in 2008, 114 tonnes in 2010, 375 tonnes in 2011, 625 tonnes, in 2012, and to-date in 2013, over 1,000 tonnes.

Along side this, their output from their own mines has steadily grown whereby they are now the biggest Gold producer in the world with over 300 million ounces mined in the last year for which results are known. But also reports have come through that they’ve been scouring Africa and buying up output from artisanal miners at the spot price, and at the rate of circa 40 tonnes per month.

If this is true, then they are already the second largest holders of Gold in the world after the U.S’s 8,700 tonnes – If they still have it?

Reports surfaced in 1974, that the Gold in the Federal Reserve vaults had gone…

The magazine article in the “The National Tattler Magazine”,  of the U.S., claimed – “All the Gold in Fort Knox is gone”

This hit the news stands on June 30, 1974. On July 3, Louise Auchincloss Boyer, who was attributed as the source of the story, and who was an executive secretary to Senator Nelson Aldrich Rockefeller, had fallen from her tenth storey apartment window at 530, East 86th Street in New York.

What perhaps adds to the mystery behind this story is that her death was reported as – “Probable Suicide” and reported in the New York Times the following day.

Recent reports, that Germany wants its gold back and has been told it will take up to 6 or 7 years further adds to this mystery.

I wonder if we will ever get to the truth, or an apology for that little mystery?

Until next time…

 

W.

Another week – Another Disaster (Mon 11/11/2013)

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As we learn of Typhoon Haiyan which thrashed through the Philippines over the week-end, totally devastating that country, On this Remembrance Day, we would do well to perhaps think also of those poor souls who lost their lives – Over 10,000 by the latest reckonings – and no doubt this figure will rise as the latest information comes in, With Vietnam now on the receiving end of the now tropical storm, we need also to consider what the costs will be to the wider economy.

Many purchasers of tech products will no doubt have seen “Made in Vietnam” or “Made in the Philippines” stamped, if not on the outside of the box, then on components and sub-assemblies on the insides.

Global supply chains now extend over many countries, and particularly in South-East Asia, with the skills and abilities of the people to build and repair the many damaged factories and logistics chains perhaps unavailable as these people are occupied just surviving and re-building their own lives and homes – will this affect global markets?

This may have devastating consequences for Global Corporations with facilities in the area of the Storm.

Insurance corporations too, may well be hard hit, as the strongest storm ever recorded with wind speeds in excess of 320Kph were recorded. With Hurricane Sandy still so fresh in Americans minds, Katrina of a few years ago, and now the most recent of these storms causing billions of dollars worth of damage, many will be questioning, “What do we need to do to stem these devastating events?”

One answer maybe to take personal responsibility and to slow consumption of oil-based commodities – particularly those which do not get re-cycled. Though even here, one has to consider whether the amount of energy spent in re-cycling, exceeds that which would be used to produce another product of like or greater capability – “What’s the point of re-cycling my old phone, if I also need a new one, which uses less energy to produce and uses energy more efficiently going forward, and recycling would use more energy than that retrieved?” we might ask.

One also has to consider the cost of capital and energy used in building the plant and equipment used to carry out the re-cycling with efficiency.

In a world of limited money (as was the case before the world of elastic currencies) the users of capital would compete for scarce funds, and this would drive up interest rates, as happened in 1906 when the San-Francisco earthquake caused devastation to that city, and Insurance corporations had to disburse to companies and individuals to help in the re-building process, which caused a liquidity trap, and helped precipitate the 1908 financial crisis, which eventually ushered in the Federal Reserve some 5 years later.

These are not easy questions to answer. Without the statistics readily to hand, individual consumers cannot make these decisions easily. This therefore places greater emphasis on transparency and full-disclosure made available by enforcing legislation at the State and International levels.  European legislation here therefore has a bigger role to play in proposing and enforcing these legislative practices.

But we might also wonder, if some countries return to commodity backed currencies (Precious metals being the most likely) then the chance of that happening again increase unless savings increase in line with interest rates. BUT, what would rising interest rates do for the Western economies, given how much has already been borrowed from the printing presses of the Federal Reserve and PBOC and Banks of England and Japan? 

The South East Asian area has had more than its fair share of disasters in recent years too, with the Boxing day Tsunami of 2004, and the one which devastated Fukushima in Japan in October 2011, and to make matters worse, there is increasing volcanic activity in the region with explosions and plumes in Sumatra, and Sunda Islands of Indonesia, Papua New-Guinea and all along the edge of the Australasian tectonic plate.

Is this the start of an era which calls upon the whole world to come together, to assist one another, or are we going to revert to type and become protective of our individual territories and economies, that resulted in the events of the early 20th Century? 

We shall see…

W.

 

 

The State and the Dollar (Wednesday 6th November)

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So, who’d have thought it? Our very own Guy (Guido) Fawkes being raised as the flag-bearer against oppressive and unjust governments.  In the U.S., people have been wearing the Guy Fawkes mask and adopted it for their Occupy Wall Street protests, against what they see as an oppressive Executive, Congress and Senate that exists merely to serve the interests of the Corporate State – BIG Business and Big Banks…

It is perhaps too easy for Governments, eager to please their political pay-masters, to believe that serving business, serves wider society’s interests too…

It seems so nice and simple.

The President can have a nice cosy fireside chat with the CEO of one large company or other, and reach a conclusion and both part feeling like they’ve resolved or headed off some crisis or other.

Rather than consult more widely, making laws or giving access to one or other CEO, can help one company at the demise or sufferance of thousands of others who, because they don’t command major public presence on National Newspapers or in National Media Corporations, don’t have their particular problems addressed.

When one company has a large dominant position in the economy, political figures can occasionally appear to bend over backwards trying to protect that business, because headlines that shout “1,000 employees to be laid off” as happened here in the UK by BAe, can drive many people, ignorant of the bigger picture that is being hidden behind the financial news, to seek simplistic solutions.

Charles Mackay’s Book, “The Madness of Crowds” should be required reading for all – especially politicians.

And Banks and Senior Bank Executives and those who ultimately decide the fate of Governments through their control of the Money supply with their claim on your taxes via the national debt is just one more example of this, as people scream: “The government must do something to help”, when quite often the actual long term solution is to do precisely the opposite.

In Britain we the people owe over £1 TRILLION and Central Bank Governor Carney, seems only too keen to add to this.

To use that American Phrase – Economics 101 (meaning the first course of an economics degree at level 1, year 1) teaches us that our income equals our expenditure over our lifetime,  I = E.

The only way we can spend more than we earn is by borrowing, and that borrowed money takes spending power away from the person or institution from whom the money is borrowed. If we borrow at the national debt level, we borrow not from rich people who have the money sitting idle, but we borrow from our children.

And in so doing we impoverish THEM.

THEY will have to work, and pay taxes to pay the Principal plus the Interest (P+I) the principal being the sum borrowed, for those not familiar with the term. The plutocracy (those with immense wealth who influence the political systems from behind the curtains) merely watch their immense wealth grow, as THEY OWN THE BANKS.

The Federal Reserve – set up in 1913, was deliberately so named to avoid the name “Central Bank” and is owned by these plutocrats. Those who were involved were the immensely wealthy Banking families of early 20th Century America, – JP Morgan, the Seif family of Israel, the Warburgs of Switzerland, the Baker, Rockefeller and Rothschild Banking families of Europe.

These powerful interests were whisked off in a private rail-car in the dead of night on November 22nd 1910 and then onto a motor launch to a small Island – Jekyll Island, off-shore Virginia where they could plot their Banking futures – sorry – they could devise a system, and drive the legislation to create the most powerful organisation on the Planet – The Federal Reserve.

At the head of this cabal of Bankers was a politician, Senator Nelson Aldrich who had been tasked with setting up a system to manage the currency of the U.S. by being appointed head of the National Monetary Commission.

A system that had already been decided upon in its founding constitution was to have ONLY GOLD AND SILVER as money, and Certificate’s of Deposit (CODs) and Gold and Silver Certificates as its currency.

BUT, Gold and Silver don’t grow on trees, and these metals merely hinder wealth creation when you don’t control the supply of them – as the Bankers don’t.

So, the goal of the Federal Reserve was to rid the world of monetary metals.

WHY?

Its true goal was best summed up by George Howard Earle, Jr. of the Real Estate Trust Company.

In 1908 he wrote:

A Central Bank as a Menace to Liberty

The solution of the problem of a central bank, with power to control the currency of the United States, to be at all adequate, must depend upon and be controlled by ultimate political principles.
The same principle that underlies the never-ending conflict between the advocates of a strong centralized government and what are called “states rights,” governs this question.
Taught in the school of experience and adversity, the early English and American patriots learned the salutary lesson that the development of peoples, as well as their happiness, depended more upon liberty – that is, the power to control and govern themselves, rather than to be controlled or governed by anybody else – than upon any other single thing; and they, therefore, in drafting our Constitution, always viewed government as an evil made necessary by the weakness and defects of human nature, and never extended it beyond that necessity.
Under the plan of freedom, of self-reliance, self-dependence, self-government, we have become the greatest, the happiest, the most powerful people of the world.

So without freedom, without liberty,  there is no happiness. (I will return to this in a future post)

But by giving one segment of the population a clear preference, a clear assistance or help, you inevitably steal a little from someone else.

By giving the NSA the power to snoop, into people’s lives, you force people who wish, for whatever reason, to remain private, to use less efficient methods of communication or to be devious in other ways.

And that can only end one way, with the slow strangulation of the economy.

Ultimately, this will end in the demise of the currency as it is currently operated. people will always strive for freedom and liberty.

China has been steadily accumulating Gold and Silver since the mid 1970s, and they have been producing Gold in increasingly larger quantities for themselves. In 2012, they mined over 300 million ounces of Gold, and imported over 1,000 metric tonnes of the yellow metal in preparation for the currency being internationalised. When that happens, the dollar will be replaced as an international reserve, and the price of all commodities will rise significantly.

People adapt to laws, and people use their ingenuity to sidestep legislation they deem unworkable, unjust or just plain not in their interests. The changes take effect over time as people adapt their behaviours, and it is changes like these that slowly affect the economy then the elastic snaps causing the unemployment we see today. A free currency system that allows people to use the monetary metals as they were intended, will raise all ships. But that will take the people by surprise as politicians and the media hide the realities from the people.

As Mao Tse Tung once cleverly stated – “A journey of a thousand miles, begins with a single step”

The battle between east and west may be bloody, and at its heart will be the value of money. A fiat currency like the dollar? Or one backed by precious metals, as used for upto 5,700years?

Until next time.

W.

PS: You can read more on this topic in my e-book “The Coming Battle”.