Now here is a story that does not make the media headlines:
www.fdic.gov/bank/individual/failed/banklist.html
P.S. If you are more concerned with the contents of your DVR than with the contents of your IRA, you might like bread and circuses.
Monday, October 26, 2009
Sunday, October 25, 2009
Doomed to Repeat History Again?
This is the twenty-second and final post in a series entitled Currency, Money and the Economy.
In the past month, you may have heard about the devastation brought about in the South Pacific by a tsunami. A tsunami is usually created by energy released by a deep undersea earthquake. This energy races unseen out in deeper waters (boats in deep water will not notice anything). However, when reaching the coast, the water recedes out and comes crashing back in, wiping out everything in its path. Unless you know an earthquake has occurred, you have no idea that a tsunami is coming until you see the tide going out. By then it is too late.
Well, the central banks of the world have created an earthquake of enormous energy with their lack of restraint in printing currency and bonds. That energy is currently traveling unseen beneath a blitz of media, Wall Street, and US government reports regarding manipulated statistics and economic recovery. We currently sit on the beach, happily counting our currency that the government has so plentifully provided us. However, by reading this series of posts, you now know that the earthquake has occurred.
History has shown that every time a nation or empire has attempted to maintain control by manipulating its currency, it is eventually undone by its own doing. There have been no exceptions to this rule. The United States has followed the historical playbook for ruining its currency to the letter. And unless the leaders we elect reverse their ways, which they show no signs of doing, the United States stands on the brink of etching its name on the list of civilizations that have followed the final step in the historical playbook. The only difference is that because the US dollar is used as the world’s reserve currency, they threaten to bring down every other country’s economy as well.
Who stands to lose the most? Well, not to be insensitive, but the poor are already poor, so they will not experience a significant difference. The rich know all of these facts and have already taken steps to diversify their wealth (see nineteenth post). Therefore, while their wealth will take a significant hit, they will still survive comfortably.
That leaves the middle class. The financial “experts” tell us to save for our retirements by investing in paper assets and holding them indefinitely. However, when currency is being printed non-stop, paper assets have no choice but to drop in value. When that deflationary or inflationary disaster strikes, it will be the middle class that will be wiped out because all they own is paper. As they say, “Our currency will not be worth the paper it is printed on.”
Yet for all the suffering that could come, there is opportunity. Throughout history, gold and silver have waited quietly in the wings and have watched society after society dilute their currency into oblivion. And when the people lose all faith in the currency they hold, gold and silver will welcome them back into their arms by revaluing themselves. And so the cycle will begin again…
So what will you do? Will you look out at the calm water and say, “I don’t see anything” and resume counting your currency on the beach? Or will you take precaution, gather up some essentials and head for the hills “where there be gold.” Remember, if you hang around long enough to see the tide go out, it will be too late. As Neo clearly stated in the Matrix Reloaded, “The problem is choice.”
We should continue to believe that we have control over our financial futures. However, we should also understand that we are just a speck in a dangerous universe being run by central banks playing games with the currency we take for granted.
Hopefully this series has changed the context in which you view the economy and investing. Whatever you decide to do with the information I have provided is up to you. Think about it the next time you open your wallet to pull out a dollar bill.
In the past month, you may have heard about the devastation brought about in the South Pacific by a tsunami. A tsunami is usually created by energy released by a deep undersea earthquake. This energy races unseen out in deeper waters (boats in deep water will not notice anything). However, when reaching the coast, the water recedes out and comes crashing back in, wiping out everything in its path. Unless you know an earthquake has occurred, you have no idea that a tsunami is coming until you see the tide going out. By then it is too late.
Well, the central banks of the world have created an earthquake of enormous energy with their lack of restraint in printing currency and bonds. That energy is currently traveling unseen beneath a blitz of media, Wall Street, and US government reports regarding manipulated statistics and economic recovery. We currently sit on the beach, happily counting our currency that the government has so plentifully provided us. However, by reading this series of posts, you now know that the earthquake has occurred.
History has shown that every time a nation or empire has attempted to maintain control by manipulating its currency, it is eventually undone by its own doing. There have been no exceptions to this rule. The United States has followed the historical playbook for ruining its currency to the letter. And unless the leaders we elect reverse their ways, which they show no signs of doing, the United States stands on the brink of etching its name on the list of civilizations that have followed the final step in the historical playbook. The only difference is that because the US dollar is used as the world’s reserve currency, they threaten to bring down every other country’s economy as well.
Who stands to lose the most? Well, not to be insensitive, but the poor are already poor, so they will not experience a significant difference. The rich know all of these facts and have already taken steps to diversify their wealth (see nineteenth post). Therefore, while their wealth will take a significant hit, they will still survive comfortably.
That leaves the middle class. The financial “experts” tell us to save for our retirements by investing in paper assets and holding them indefinitely. However, when currency is being printed non-stop, paper assets have no choice but to drop in value. When that deflationary or inflationary disaster strikes, it will be the middle class that will be wiped out because all they own is paper. As they say, “Our currency will not be worth the paper it is printed on.”
Yet for all the suffering that could come, there is opportunity. Throughout history, gold and silver have waited quietly in the wings and have watched society after society dilute their currency into oblivion. And when the people lose all faith in the currency they hold, gold and silver will welcome them back into their arms by revaluing themselves. And so the cycle will begin again…
So what will you do? Will you look out at the calm water and say, “I don’t see anything” and resume counting your currency on the beach? Or will you take precaution, gather up some essentials and head for the hills “where there be gold.” Remember, if you hang around long enough to see the tide go out, it will be too late. As Neo clearly stated in the Matrix Reloaded, “The problem is choice.”
We should continue to believe that we have control over our financial futures. However, we should also understand that we are just a speck in a dangerous universe being run by central banks playing games with the currency we take for granted.
Hopefully this series has changed the context in which you view the economy and investing. Whatever you decide to do with the information I have provided is up to you. Think about it the next time you open your wallet to pull out a dollar bill.
Saturday, October 24, 2009
Further Research and References
This is the twenty-first post in a series entitled Currency, Money and the Economy.
All of the information in this series of posts may be eye-opening and overwhelming to you. It certainly caught me off guard when first reading about this myself. However, believe it or not, the information I have provided barely scratches the surface. There are many more books and websites that dive deeper into each subject we have touched upon. Below is a list of references for you to begin your own research.
Back in a previous EBFLC essay titled “The Long Road Ahead,” I gave you some general rules to guide you during the recession. Rule #1 was to assume nothing and question everything. Never take anything from a financial “expert” at face value, including myself. Always question what they are trying to tell you and come to your own conclusions on how it affects your own personal economic situation. Some of the information provided in these posts may have unnerved you. If that is the case, then I hope you will do your own research and continue the search for answers. You will find no lack of arguments for and against the data provided in these posts. Hopefully you will find answers such that you can come up with a plan that suits your economic needs.
Books
Empire of Debt: The Rise of an Epic Financial Crisis by William Bonner and Addison Wiggin
I.O.U.S.A. by Addison Wiggin and Kate Incontrera (companion to the documentary)
Guide to Investing in Gold & Silver: Protecting Your Financial Future by Michael Maloney
Documentaries
I.O.U.S.A. (available on DVD)
Websites
http://www.dailyreckoning.com/
http://www.nowandfutures.com/
http://www.usdebtclock.org/
http://www.goldsilver.com/
http://www.apmex.com/
http://www.pgpf.org/
http://www.agorafinancial.com/
http://www.fiscalaccountability.org/
All of the information in this series of posts may be eye-opening and overwhelming to you. It certainly caught me off guard when first reading about this myself. However, believe it or not, the information I have provided barely scratches the surface. There are many more books and websites that dive deeper into each subject we have touched upon. Below is a list of references for you to begin your own research.
Back in a previous EBFLC essay titled “The Long Road Ahead,” I gave you some general rules to guide you during the recession. Rule #1 was to assume nothing and question everything. Never take anything from a financial “expert” at face value, including myself. Always question what they are trying to tell you and come to your own conclusions on how it affects your own personal economic situation. Some of the information provided in these posts may have unnerved you. If that is the case, then I hope you will do your own research and continue the search for answers. You will find no lack of arguments for and against the data provided in these posts. Hopefully you will find answers such that you can come up with a plan that suits your economic needs.
Books
Empire of Debt: The Rise of an Epic Financial Crisis by William Bonner and Addison Wiggin
I.O.U.S.A. by Addison Wiggin and Kate Incontrera (companion to the documentary)
Guide to Investing in Gold & Silver: Protecting Your Financial Future by Michael Maloney
Documentaries
I.O.U.S.A. (available on DVD)
Websites
http://www.dailyreckoning.com/
http://www.nowandfutures.com/
http://www.usdebtclock.org/
http://www.goldsilver.com/
http://www.apmex.com/
http://www.pgpf.org/
http://www.agorafinancial.com/
http://www.fiscalaccountability.org/
Friday, October 23, 2009
The United States Dollar as the World Reserve Currency
This is the twentieth post in a series entitled Currency, Money and the Economy.
Way back in the fourth post, we established the fact that the US dollar has served as the world reserve currency since World War II. Everything that is traded internationally is denominated in US dollars. However, with all the recent financial trouble the United States have wrought on the rest of the world, some have begun to wonder if the US dollar’s days are numbered as the world reserve currency.
Britain’s daily newspaper The Independent reported on October 6, 2009 that oil-exporting countries in the Middle East as well as China, Japan, Russia and France met in secret to begin work on a plan to replace the US dollar as the world reserve currency. Government officials from all countries denied that the story was true. The previous week, Iran had stated that it had already traded away its US dollars and was using the Euro as its reserve currency. The United Nations has released reports saying that it wants to replace the US dollar as the world reserve currency. So it is obvious there is concern about the strength of the US dollar. However, is there a reason for us to panic just yet?
The answer to this question is no. However, the reason does need some explaining. The United States has about $15 trillion in circulation that is being held by nearly every country in the world, including ourselves. If the world were to decide to replace the US dollar with something else, then there would be less of a reason to hold US dollars. That means that other countries would go to the FOREX market and exchange US dollars for either their own currency or whatever currency becomes the new standard.
With everybody selling US dollars, that would make the US dollar much weaker relative to every other currency and begin the onslaught of inflation here in the United States. However, by doing so, the other countries essentially shoot themselves in the foot two ways.
With their currencies now much stronger relative to the US dollar, other countries will discover that it is now more expensive to export to the United States. The American consumer will curb their spending with higher prices. Therefore, the export machines that these foreign countries have built will slow, stalling out their own economies.
Most countries hold US Treasury bonds. Let’s say that India purchased 10-year US Treasury notes two years ago. That means in eight years, the United States will return the US dollars back to India with interest. However, if dollars are no longer the world reserve currency and have weakened considerably because it was removed, then how valuable will that 10-year US Treasury Bond be eight years from now, even with interest? It will be a fraction of the return that India was expecting when it purchased the note initially. Every country holding US Treasury bonds would have the same problem.
Therefore, if other countries successfully removed the US dollar as the world reserve currency, they would be responsible for triggering the economic Armageddon that all central banks are trying to avoid. Since these countries are still trying to recover from this last economic downturn, I doubt they want to deliberately start another one. However, if the trend of printing endless currency does not stop soon, somewhere down the road there will be a breaking point and everyone will lose confidence in the US dollar.
Way back in the fourth post, we established the fact that the US dollar has served as the world reserve currency since World War II. Everything that is traded internationally is denominated in US dollars. However, with all the recent financial trouble the United States have wrought on the rest of the world, some have begun to wonder if the US dollar’s days are numbered as the world reserve currency.
Britain’s daily newspaper The Independent reported on October 6, 2009 that oil-exporting countries in the Middle East as well as China, Japan, Russia and France met in secret to begin work on a plan to replace the US dollar as the world reserve currency. Government officials from all countries denied that the story was true. The previous week, Iran had stated that it had already traded away its US dollars and was using the Euro as its reserve currency. The United Nations has released reports saying that it wants to replace the US dollar as the world reserve currency. So it is obvious there is concern about the strength of the US dollar. However, is there a reason for us to panic just yet?
The answer to this question is no. However, the reason does need some explaining. The United States has about $15 trillion in circulation that is being held by nearly every country in the world, including ourselves. If the world were to decide to replace the US dollar with something else, then there would be less of a reason to hold US dollars. That means that other countries would go to the FOREX market and exchange US dollars for either their own currency or whatever currency becomes the new standard.
With everybody selling US dollars, that would make the US dollar much weaker relative to every other currency and begin the onslaught of inflation here in the United States. However, by doing so, the other countries essentially shoot themselves in the foot two ways.
With their currencies now much stronger relative to the US dollar, other countries will discover that it is now more expensive to export to the United States. The American consumer will curb their spending with higher prices. Therefore, the export machines that these foreign countries have built will slow, stalling out their own economies.
Most countries hold US Treasury bonds. Let’s say that India purchased 10-year US Treasury notes two years ago. That means in eight years, the United States will return the US dollars back to India with interest. However, if dollars are no longer the world reserve currency and have weakened considerably because it was removed, then how valuable will that 10-year US Treasury Bond be eight years from now, even with interest? It will be a fraction of the return that India was expecting when it purchased the note initially. Every country holding US Treasury bonds would have the same problem.
Therefore, if other countries successfully removed the US dollar as the world reserve currency, they would be responsible for triggering the economic Armageddon that all central banks are trying to avoid. Since these countries are still trying to recover from this last economic downturn, I doubt they want to deliberately start another one. However, if the trend of printing endless currency does not stop soon, somewhere down the road there will be a breaking point and everyone will lose confidence in the US dollar.
Thursday, October 22, 2009
Tupperware Party? Let's Throw a Gold Party Instead!
This is the nineteenth post in a series entitled Currency, Money and the Economy.
You may recently have seen advertisements in the media about the unwanted gold that you might have in a drawer somewhere and selling it for cash. In addition, these companies hold gold parties. You would attend one of these parties with some gold that you want to sell. They would weigh and judge the purity of the gold, and then pay you cash for it.
Now since we are in tough economic times, it is understandable to have the need for cash right now. Also, these companies are more interested in unwanted jewelry and other gold items, rather than bullion and coin, for meltdown value. However, knowing what you have learned in this series, ask yourself what exactly they are doing. Simply put, they are trading you a hard asset for paper! In a time where paper assets are running rampant, they are offering you more paper!
Why on earth would a company do something like this? The financial “experts” tell us that gold is speculative and could drop in price simply because at $1000, they think it is already a superbubble. Why would a company risk paying $1000 an ounce of gold if the “experts” say the price will drop? If it drops, they stand to lose a lot of capital. That is, unless they know exactly where gold is headed, which they believe is straight up. These companies are not stupid. They have done their homework and are betting that one of those disaster scenarios we previously discussed is on its way.
So who is funding these companies offering to buy your gold anyway? That’s relatively easy to speculate on. My guess is that there is a lot of private capital out there (i.e., the rich) who do not want to own any more paper assets. So they have pooled their capital together to gather in all the hard assets they can. And us middle class folk, still believing the buy and hold mantra and not knowing any better, gleefully fork over our gold for cash that we desperately need to keep up with our lifestyles. The rich fleecing the middle class again. Ahh, capitalism at its worst.
That being said, if you have some gold jewelry or other gold items that you have no real use for anymore, these companies do pay top dollar for it. However, I would hold onto any bullion or coin that you currently have.
You may recently have seen advertisements in the media about the unwanted gold that you might have in a drawer somewhere and selling it for cash. In addition, these companies hold gold parties. You would attend one of these parties with some gold that you want to sell. They would weigh and judge the purity of the gold, and then pay you cash for it.
Now since we are in tough economic times, it is understandable to have the need for cash right now. Also, these companies are more interested in unwanted jewelry and other gold items, rather than bullion and coin, for meltdown value. However, knowing what you have learned in this series, ask yourself what exactly they are doing. Simply put, they are trading you a hard asset for paper! In a time where paper assets are running rampant, they are offering you more paper!
Why on earth would a company do something like this? The financial “experts” tell us that gold is speculative and could drop in price simply because at $1000, they think it is already a superbubble. Why would a company risk paying $1000 an ounce of gold if the “experts” say the price will drop? If it drops, they stand to lose a lot of capital. That is, unless they know exactly where gold is headed, which they believe is straight up. These companies are not stupid. They have done their homework and are betting that one of those disaster scenarios we previously discussed is on its way.
So who is funding these companies offering to buy your gold anyway? That’s relatively easy to speculate on. My guess is that there is a lot of private capital out there (i.e., the rich) who do not want to own any more paper assets. So they have pooled their capital together to gather in all the hard assets they can. And us middle class folk, still believing the buy and hold mantra and not knowing any better, gleefully fork over our gold for cash that we desperately need to keep up with our lifestyles. The rich fleecing the middle class again. Ahh, capitalism at its worst.
That being said, if you have some gold jewelry or other gold items that you have no real use for anymore, these companies do pay top dollar for it. However, I would hold onto any bullion or coin that you currently have.
Wednesday, October 21, 2009
Commodities
This is the eighteenth post in a series entitled Currency, Money and the Economy.
While we are talking about hard assets, how about investing in commodities such as oil, steel, and agriculture? Commodities are hard assets and have values associated with them. However, their value is derived from their perceived importance in the world at a particular time. For example, oil is used in everything from fuel to plastics. Therefore, a barrel of oil has value today. However, if the world develops alternative forms of energy, such as solar power and bio fuels, then the importance of oil will diminish, and so will its value. Gold and silver do not have to do anything but glitter to have value.
That being said, investing in commodities is prudent because they are still hard assets and will not suffer as badly as paper assets in an economic disaster scenario. However, you should invest in commodities that will have a high priority in a deflationary or inflationary environment. Food and energy (traditional or clean) would be two such commodities. Not coincidentally, those are the two commodities that the US government likes to either manipulate or omit when reporting inflation numbers today.
While we are talking about hard assets, how about investing in commodities such as oil, steel, and agriculture? Commodities are hard assets and have values associated with them. However, their value is derived from their perceived importance in the world at a particular time. For example, oil is used in everything from fuel to plastics. Therefore, a barrel of oil has value today. However, if the world develops alternative forms of energy, such as solar power and bio fuels, then the importance of oil will diminish, and so will its value. Gold and silver do not have to do anything but glitter to have value.
That being said, investing in commodities is prudent because they are still hard assets and will not suffer as badly as paper assets in an economic disaster scenario. However, you should invest in commodities that will have a high priority in a deflationary or inflationary environment. Food and energy (traditional or clean) would be two such commodities. Not coincidentally, those are the two commodities that the US government likes to either manipulate or omit when reporting inflation numbers today.
Tuesday, October 20, 2009
Precious Jewels
This is the seventeenth post in a series entitled Currency, Money and the Economy.
Who says that precious metals are the only thing of value? How about precious jewels, such as diamonds and emeralds? Similar to platinum and palladium, the supply of precious jewels is erratic and not dependable. For example, unless you are a professional dealer, you cannot simply trade diamonds and rubies like stocks. South Africa controls the supply of diamonds to the rest of the world and thus can dictate the price. It is rumored that if DeBeers released all the diamonds stored in their vaults, they price of diamonds would fall by over 50%.
The quality of precious jewels is also erratic. As many know when shopping for a diamond ring, the price depends on clarity and color of the stone, not just weight. Gold and silver, on the other hand, can always be readily obtained in their purest form (although there are lesser qualities out there in jewelry form).
In addition, technology has begun to create synthetic jewels. These are not fakes, but real diamonds and other jewels created through artificial processes of heat and pressure. If man can create something on a replica scale, it limits the value the object has. Gold and silver cannot be recreated, although the legends and myths of alchemy continue to persist.
Who says that precious metals are the only thing of value? How about precious jewels, such as diamonds and emeralds? Similar to platinum and palladium, the supply of precious jewels is erratic and not dependable. For example, unless you are a professional dealer, you cannot simply trade diamonds and rubies like stocks. South Africa controls the supply of diamonds to the rest of the world and thus can dictate the price. It is rumored that if DeBeers released all the diamonds stored in their vaults, they price of diamonds would fall by over 50%.
The quality of precious jewels is also erratic. As many know when shopping for a diamond ring, the price depends on clarity and color of the stone, not just weight. Gold and silver, on the other hand, can always be readily obtained in their purest form (although there are lesser qualities out there in jewelry form).
In addition, technology has begun to create synthetic jewels. These are not fakes, but real diamonds and other jewels created through artificial processes of heat and pressure. If man can create something on a replica scale, it limits the value the object has. Gold and silver cannot be recreated, although the legends and myths of alchemy continue to persist.
Subscribe to:
Posts (Atom)
